If you’ve been accused of a crime like a Ponzi scheme, then you’re face federal charges. This serious criminal offense can land you in jail and lead to years of confinement, penalties or other unwanted punishments. What is a Ponzi scheme, though, and why is it so looked down upon?

A Ponzi scheme is investment fraud. It’s a type of fraud that involved the payment of returns to investors by using the funds provided by new investors. By using the new investments to pay old returns, the investments look like they’re successful. In reality, no real investment has taken place.

A Ponzi scheme will collapse without someone investing it. The goal of any scheme typically is to prevent investors from cashing out, thus keeping the illusion of the investments growing as they should. If everyone tried to cash out at once, there would be nowhere near enough money to pay out the proper returns that the schemers reported.

Ponzi schemes typically promise investors high investment returns with low or no risk to the investment. Consistent returns can also be a sign of a Ponzi scheme, as the stock market can be difficult to predict. Issues with getting paperwork or statements as promised can also signal that the investment is part of a Ponzi scheme.

Because of the severity of this crime and the impact it has on others, the punishments may be severe. If you’ve been accused, you need to protect yourself from the start. Remember, you have the right to have your side of the story heard, and you’re not guilty until you’re proven to be so in a court.

Source: U.S. Securities and Exchange Commission, “Ponzi Schemes” accessed Jan. 26, 2015