Colorado Pyramid and Ponzi Scheme Laws

Under Colorado law, a pyramid scheme or Ponzi scheme is “any program utilizing a pyramid or chain process by which a participant in the program gives a valuable consideration in excess of fifty dollars for the opportunity or right to receive compensation or other things of value in return for inducing other persons to become participants for the purpose of gaining new participants in the program.” Even as one of the most famous white collar crimes, pyramid schemes can be hard to wrap your mind around. This is a quick summary of pyramid and Ponzi scheme laws in Colorado.

Overview of Colorado Pyramid or Ponzi Scheme Laws

The best way to protect yourself from a pyramid or Ponzi scheme is to identify it before you get roped in. You can learn more about the signs of a pyramid scheme and ask these questions to anyone trying to sell you investments or business opportunities.

However, both victims and the accused would do well to inform themselves about how pyramid and Ponzi schemes are defined and punished in Colorado. The following table outlines Colorado’s pyramid scheme laws.

Code Sections

COL. REV. STAT. §6-1-105(1)(q): Deceptive Trade Practices

What is Prohibited?

Contriving, preparing, setting up, operating, publicizing by means of advertisements, or promoting any pyramid promotional scheme

Penalties

Penalties from Civil Actions Brought by the Attorney General

The attorney general or a district attorney may bring a civil action on behalf of the state to seek the imposition of a fine of $2,000 for each such violation. The maximum civil penalty is $500,000.

The attorney general or a district attorney may also obtain a restraining order or an injunction on the violation.

Criminal Penalties

Any person who promotes a pyramid promotional scheme is guilty of a class 1 misdemeanor, punishable by up to 18 months in jail and/or a $5,000 fine. A second or subsequent conviction is a class 6 felony, punishable by up to 18 months in jail and/or a $100,000 fine.

Who Enforces these Laws?

The Colorado Attorney General enforces the prohibition of pyramid schemes in Colorado.

Where Can Victims Get Help?

If you think you may be a victim of a pyramid scheme, report it to the Colorado Attorney General:

Colorado Attorney General Consumer Protection Hotline
Toll Free: 800-222-4444
Metro Denver: 303-222-4444
www.coloradowattorneygeneral.gov/cp

Note: State laws are always subject to change through the passage of new legislation, rulings in the higher courts (including federal decisions), ballot initiatives, and other means. While we strive to provide the most current information available, please consult an attorney or conduct your own legal research to verify the state law(s) you are researching.

Colorado Pyramid and Ponzi Scheme Laws: Related Resources

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Fraud schemes are designed to be confusing and difficult to understand and sometimes the laws that apply to them can seem that way too. A qualified lawyer can help eliminate a lot of the mystery and will work to defend you. Contact a local attorney for a free evaluation of your case.

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