Reasons Solo 401k Plans are Easy Targets of Ponzi Schemes

It’s quite simple really why fraudsters target Solo 401k plans for their Ponzi schemes:

For one, most self-employed individual’s investments are concentrated in Solo 401k plans over SIMPLE or SEP IRAs because Solo 401k plans allow for higher contribution limits, self-direction (i.e., Solo 401k may be invested in alternative investment such as real estate, private equity shares and promissory notes, to name a few), and, most importantly, because the business owner can serve as trustee of his or her own Solo 401k, resulting in faster and timely investment decisions.

The second reason why fraudsters target Solo 401k investors deals with the fact that like other retirement plans, Solo 401k plans are long term saving retirement vehicles, which means investors often don’t look to make distributions until they retire because doing so generally results in the payment of taxes and possible penalties.

The final reason deals with the Solo 401k investor not understanding how investments work and being lured by high investment returns.

Additional Information

Investment Fraud

Targets of Investment Fraud

Techniques Used by Fraudsters

Tips for Avoiding Fraud

SOLO 401(K)