New York residents and others may remember that Bernie Madoff was taken into custody in December 2008. He was sentenced to 150 years in prison after being convicted of perjury and other felony charges. Madoff ran a Ponzi Scheme, in which investors put money into a project or some other entity that doesn't exist. The original investors are paid with cash that is collected from those who enter into the deal later on.
One of the critical lessons learned from the Madoff scandal is that investors should always spend time investigating an opportunity before handing over their money. Taking the time to do so can help an individual better understand how the returns are generated and if they are likely to continue. If there are parties claiming that an investment is too good to be true, it is possible that they are correct.
In the Madoff case, the SEC was notified of possible fraud, but the agency decided not to pursue the matter. Ultimately, investors have every right to ask as many questions as they want about a particular investment. If those questions aren't answered to an investor's satisfaction, it may be best to keep looking for a place to put risk capital. Generally, reputable investment firms and funds will answer any questions a person has using solid sources.
Those who are alleged to have created a Ponzi Scheme may face many years in prison in addition to fines and other penalties. In some cases, a judge may order an individual to pay restitution to victims. An attorney may be able to help an individual avoid some or all of those penalties. This may be done by asserting that a fund or investment was legitimate and that investor funds were accounted for using established best practices.