The Most Common Investment Scams
First Published Date: September 6, 2010 ADawnJournal.com
We all want to make money. That quest is essentially what makes the world go round. Making good money is important because the more money you make, the easier of a life you often have. Many people will work for their money, but some like to make money even when they are not busy working. This is done through investments. Whether you are investing in real estate, stocks, or bonds, you are making money when those investments make money.
Sadly, there are those out there who also want to make money off of investments, but in an illegal manner. They want to make money off you giving them money for fake investments. This is actually more common than people think and each year it can cost people billions of dollars.
Knowing the scams is a good way to avoid becoming a victim of those scams. So, to help you, I present the most common investment scams out there.
1. Ponzi Scheme: named after Charles Ponzi, this is a common type of investment scam that has been in the news a lot in the past few years. In the early 1900s, Ponzi was able to get $10 million from investors by promising them 40 percent back. He would use the money from new investors to pay the returns of old investors. This works until there are no new investors and the money dries up. Bernie Madoff did the same thing and defrauded hundreds of people out of billions of dollars over the course of two decades.
2. Promissory Notes: These are short-term debt instruments that are sold by insurance agents and issues by non-existent companies. The agents promise very high returns of as much as 15 percent monthly with no risk. Sadly, this is not the case as the money is given to the agents and then never seen again.
3. Senior Investment Fraud: Seniors want to have money for retirement, which leads them to finding investments to help money coming in. Con artists will contact seniors and offer them steady returns, low risk and high rewards if they invest in bogus securities, promissory notes, charity gifts and more. One such scam took $2 million from senior’s pensions and IRAs in Pennsylvania in 2003.
4. Stockbrokers: Many stockbrokers are honest and love what they do, but some are out there to steal money and defraud individuals. Some stockbrokers will cut corners to gain investors and charging unlicensed fees in order to gain money from investors who are not informed about the law.
5. Unlicensed Agents: There are some con artists who will say they are insurance agents who can help make you money through investments. However, they will not have any license to do so and therefore are not there to do you any benefits. They will promise very high returns, very little risk, and consistent returns for investors. It is very important that you contact the security regulator in your state to see if the agent is licensed.
6. Prime Bank: Con artists will offer you over 100 percent in returns through investment portfolios in the major banks on the planet. They will target people and mention secret investments by leading world families and royalty. They will state these are banks and investments that are only open to a few, highly wealthy people and investing in them will yield immense rewards. There is no such thing as secret investments and banks, but sadly these con artists target those who believe in conspiracy theories so governments saying there are no such investments only add fuel to the fire.
7. Internet Fraud: With the Internet being available to everyone, there is a lot of opportunities for individuals to cheat others. Whether it is through phishing, identity theft, or offering bogus investments, there is a lot of ways con artists can target potential investors on the Internet. In just one investigation in November of 2003, 125,000 victims were discovered, who lost more than $100 million combined. It is important that investors do their research and do not take what
8. Affinity Fraud: When there is a serious natural disaster, many will come together to help. They will donate money to offer relief to those affected and con artists will have no problem stealing that money. Some con artists will offer you the chance to give money to charities, which will get you a tax write-off. However, they will just take the money and run. Some con artists will also use this method with foreign exchange scams.
9. Variable Annuities: Many investors do not know what variable annuities are and con artists will take advantage of that. Agents and con artists out to make a buck will use that lack of knowledge to make a lot of money off of investors. It is no surprise that the increase in annuity sales has also come with a big increase in complaints. Con artists and agents will not disclose the very high sales commissions or surrender charges to investors. Many of these bad individuals will target investors, especially seniors, through investment seminars. The problem is this type of investment is not suited for those who are retired. You should only go for a variable annuity if they can keep their investment for 10 years or more.
When you are trying to make money off of investments, it is important that you do your research so that you do not fall victim to investment fraud. You want to make money off your investment, not lose it and never be able to recover it. Talk with reputable agents and agencies and even hire a financial advisor you trust. Also, do your research on who is handling your money and request constant reports on how your money is doing. You are giving someone your money to make you money, and you have a right to know what that money is doing for you. Don’t be afraid to ask questions and get the right investment for you through proper research.
