Investment Schemes, Scams and Fraud
Investment scammers know how to turn your greed against you. Don't let the promise of big profits overpower your good judgement by making safe, wise investments.
Investors know they need to be careful. Unwise investment decisions can be costly. No matter how careful you are there is always some degree of risk. It's the nature of business. Some people tolerate more of it than others. High risk can lead to high gains. There's nothing wrong with taking a calculated risk once in a while.
Some investments promise high returns without any risk at all. That's right. They claim you can't lose. It's a sure thing. If you think this is possible you are ripe for picking by an investment scheme. Your pocket will be picked faster that you can say, "Where's the money?"
No investment is "risk-free"
Remember, no investment is without risk. Period. If the risk is high you need to realize that there is a good chance you will lose money on the deal. When someone tells you otherwise you need to consider the source. That could be you brother, sister, mother or father. No, I'm not saying they are trying to rip you off. Your close friends or relatives may have been duped by a scheme themselves. Pyramid schemes abound on the internet. Emails detailing the latest penny stock opportunity fill my spam folder daily. Asking a lot of questions and doing research, your due diligence, before investing can protect you and your family. Use our tips and articles on investment fraud to learn the techniques criminals use before you become a victim.
Investment Fraud Warning Signs:
- A high rate of return is guaranteed
- You're guaranteed to profit from the investment
- The investment promoters are in another country
- The mailing addresses are PO boxes or "mail drops"
- You must act fast to "get in on the ground floor"
- The investment promoters use high-pressure sales tactics
- Those promises of high return on investment aren't in writing
- Promoters unwilling to share how an investment will make money
Steps to Avoid Investment Fraud
How you detect and avoid a particular fraud will vary, depending upon the nature of the investment, but taking following actions will help you avoid many investment scams:
- It's easy to create a slick website or brochure, so independently verify their claims.
- Review financial statements before making an investment
- Verify all claims before investing your money. For example:
Verify all claims regarding contracts with well-known companies.
If new inventions are involved, carefully review patent applications and insure they've been properly submitted. - Investigate all major stakeholders in any investment. Research their background and history. What's their track record like? Have they been successful, unsuccessful, or somewhere in between?
- Gather and review all public records related to this investment:
Use the internet to access information about where the company's incorporation. Visit their website for past annual reports and other documents filed with the SEC.
