New Zealand has a horrible history of ponzi schemers.

In five of the last nine years, ponzi schemers have been banged up in jail as a result of their nefarious actions.

Between 1991 to 2012, New Zealand had at least one active Ponzi schemer at work at all times, most under the old Securities Commission, which was ineffectual and was swept away to be replaced by the Financial Markets Authority (FMA).

The FMA can't guarantee there are no ponzi schemes operating as you read this.

That means being on the alert when you choose who to invest with, but the large numbers of investors who have been caught indicate it is easy to fall prey to sharp Ponzi schemes, which the regulator says pop up more frequently in low interest rate times.

The word Ponzi comes from Italian Charles Ponzi, whose 1920s investment scheme in America forever joined his name to faux investment schemes where one depositors' money is paid as returns to another with the pretence that it was legitimately earned from investing.

The classic feature of a Ponzi scheme is that early investors, who are gulled with huge fictitious returns claimed to be from investments in exotic or hard-to-price assets, become ambassadors for the scheme, often encouraging friends and relatives to join.

Spotting a Ponzi scheme has proven beyond the ability of many investors, but they all share some hallmarks.

They are not offered by mainstream banks and large financial services companies.

But the finance company failures show that large, apparently respectable companies can lose investors large quantities of money without being Ponzi schemes.

They tend to be distributed by word of mouth, and through "affinity" groups like churches. They aren't openly advertised, and so are invisible to regulators' Google searches.

And, they can be based in large cities like Auckland, Wellington and Dunedin, or in out-of-the way places like the Hawke's Bay township of Waipawa.

The bait to get investors is the offer of suspiciously high returns, the kind that KiwiSaver managers and banks cannot offer.

Bruce Tichbon says it's wrong to see Ponzi scheme victims as fools. Lawyers and even finance bigwigs like Hanover Finance's Mark Hotchin have been caught.

Tichbon was caught by the Ross Asset Management Ponzi scheme.

He says Ponzi schemer David Ross prepared incredibly convincing investors reports.

"They were meticulous. A number of people went back and checked the prices against the shares that he claimed to be holding. They matched."

And there were gatherings of happy investors singing Ross' praises.

"He had a party in Wellington I went to. I met a crowd of happy people who had financially secure futures and David Ross was the origin of that." Tichbon says.

Ponzi schemers are by definition good liars, believable enough to keep the money flowing in.

They are also adept at using ignorance of the law to draw in their victims. One, for example, was listed on the Financial Service Provider.

The FMA says: "Registration on the FSPR is not a licensing process, it is simply an administrative registration process, it is not an official stamp of approval. Because a company is registered on the FSPR it does not mean it is licensed or regulated by the FMA or any other government agency."

Ponzi schemes can last for along time, and involve a lot of people. In all, 1200 investors are understood to have put money with Ross.

That longevity and the sense of safety in numbers can lull investors into a false sense of security.

The Serious Fraud Office (SFO) website says Ross source ran his Ponzi from June 2000 to September 2012.

Ross investors, who according to the SFO website have lost about $115m, may have thought that an unbeatable record, until Dunedin lawyer John David Milne pleaded guilty to having run a Ponzi scheme from 1991 to 2012.

Another sign that an investment scheme may be a Ponzi include it not being able to demonstrate that client money or property is ring-fenced, or preferably held with a reputable third party, says the FMA.

Having "secretive and complex strategies" for investing is often another sign that all is not well.

The FMA pledges to act on tip-offs, but Tichbon says regulators were slow to act on Ross.

Tichbon says it is time New Zealand enacted a Ponzi law which states that when a Ponzi scheme is wound up all the money paid out is clawed back and fairly shared with victims. He also wants tougher sentences for Ponzi schemers.

New Zealand history of Ponzi schemes

2014: Seventy-nine-year-old Dunedin lawyer John David Milne described in court as "a consummate thief and liar" was jailed for more than eight years after his Ponzi scheme cost investors $2million.

READ MORE: 'Liar' lawyer jailed for $2m Ponzi scheme

2013: Our greatest Ponzi schemer, David Ross was jailed for 10 years and 10 months. The court heard that the Wellington fund manager said he was investing people's money in shares, but that was a charade. In all, he overstated returns by well over $300m. Total losses to investors appear to be over $115m. Unwinding the scheme threatens to take years.

READ MORE: David Ross sentenced to 10 years for fraud

2012: Aucklander Jacqui Bradley was jailed for seven years and five months. The court heard she and her now-dead husband stole from investors while pretending to invest their money. In all $15.5m was lost by investors in the B'On Financial Services business. Investors were told their money was invested with Macquarie Bank, the New Zealand government and in gold futures. It wasn't, and when money needed to be paid out, the Bradleys used other investors' money to do it.

READ MORE: Bradley offending premeditated

2009: Hawkes Bay man Warren Pickett was sentenced to five years in prison over the operation of a finance company scheme that morphed, according to the High Court, into a Ponzi scheme. A 2010 judgement from the Napier High Court said: "In time (it is hard to tell when), Warren Pickett began to mine new deposits from depositors to meet interest commitments in respect of existing deposits, rather than making the loans or investments that he represented to depositors he would be making with their money." More than 200 investors lost a combined $3.77m. Most lived in the small township of Waipawa. A trusted figure in the community, Pickett was a justice of the peace and a marriage celebrant.

READ MORE: The man who ripped off a town

2006: Margarite and Bill Papple, and Tina Marie West from Rotorua were found to have defrauded investorsof at least $8.3m of the $14.6m in 2000 and 2001. "The appellants' method of soliciting funds from investors was to offer high returns, ranging from an effective interest rate of 3 per cent per month up to 10 per cent per month and sometimes even higher," the Court of Appeal found. West and Margarite Papple were sentenced to five years in jail. Bill Papple, who was found to have acted out of "a sense of misguided loyalty to his wife", received a lesser sentence.

READ MORE: Hotchin caught up in scam