Even smart investors can fall for a well-orchestrated Ponzi scheme. That’s because it offers high rates of return practically impossible to match in any marketplace—for good reason. A Ponzi scheme relies on money from investors, rather than from actual profit, to pay the promised returns, dooming it to failure. The earnings—if there are any—will be less than the payments, and the scheme eventually will collapse.

Named for Charles Ponzi, a Boston man convicted in 1920 for duping about 30,000 Americans of an estimated $10 million, the scam works just as well today as it did back then. Ponzi schemes are usually marketed by slick fraudsters who surround themselves with the trappings of legitimacy—nice office space, a receptionist, investment counselors, and professionally designed color brochures describing the investment. Bernie Madoff was hardly an original thinker.

There’s only one thing you can count on in a Ponzi scheme: The money you invest will be money lost. You may not even receive the promised interest—and if you do, it’s usually paid late.

If you answer “yes” to any of the following questions, you’re probably dealing with a swindler:

• Does the promoter make it sound as if you can't lose?

• Are you promised an unusually high rate of return or interest payment on your capital?

• Are you pressured to make a quick decision because new investment units “are selling fast?”

• Does the promoter have prior successful experience in the investment area being promoted?

Protect yourself. Be suspicious of any deal that promises a fantastic return with little risk. Know whom you are dealing with. Check the company’s reputation with your local Better Business Bureau, or state Attorney General’s Office. Protect your retirement nest egg.

If you believe you’ve been defrauded in any scheme that involves the U.S. Mail, report the incident to Postal Inspectors online or by calling 1-877-876-2455.