If you are accused of participating in or leading a Ponzi scheme, you could face significant penalties. This type of offense is known as a white-collar crime and can result in criminal charges.
Ponzi scheme overview
A Ponzi scheme attracts investors with a promise of large investment returns through legitimate transactions, but instead uses funds deposited by new investors to pay previous investors. Usually, the investors are promised that there is little risk and that they will get consistent returns.
The person running the operation then needs to pull in new investors to continue paying returns. When there are no more individuals to recruit, the scheme no longer works.
Investors can be harmed in several ways, including losing their entire investment and a loss of confidence in financial systems. They can also suffer emotional distress when they have lost their financial security and no longer feel that they can trust those around them.
Penalties and defenses
If you are convicted of participating in a Ponzi scheme, you could face criminal charges for fraud, wire fraud, mail fraud, securities fraud and others. You may be required to pay fines and could be sent to prison. The court may also order you to pay restitution to the victims to compensate them for their financial losses.
In some situations, you may also be required to forfeit any assets you received through the scheme and you could be banned from participating in securities trading. The penalties for this crime are often imposed to deter others from doing the same activities.
There may be defenses available to you.