Investment Scams

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”

Image of a piggy bank

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

How to Avoid Investment Scams

Anyone can be a victim of investment fraud. Sure, inexperienced, naive investors can be easy pickings for scam artists, but seasoned investment veterans can be also fooled by slick, fast-talking shysters. Investment schemes can be simple or complex and well thought out in order to bilk unsuspecting investors out of as much money as possible. We’ve all heard horror stories in which nest eggs disappear, retirements are ruined, and lives destroyed by unscrupulous fraudsters. That’s why we’ve come up with several tips to help you identify investment scams before you lose your shirt in a bad deal.

If you’re thinking about making an investment or have been approached by someone trying to sell you on an investment opportunity, keep these tips in mind so that you can invest safely and safeguard your future:

  • Take your time to investigate an investment.

    Say no to any salesperson that pressures you to make an immediate decision. What’s the hurry? If he or she doesn’t have the time to explain the investment to your regular investment professional, or other party, or if they ask “Can’t you make your own investment decisions?” Just say NO! You have the right
    and responsibility to check out the salesperson, firm, and the investment opportunity in question. Almost all investment opportunities must be registered with the state you reside in. Call your state Securities Division to enquire about invesments you have questions about. Extensive background information on investment professionals and firms should be available for free. If you can’t find any information be wary. Before you even consider investing, get the prospectus, review it carefully, and make sure you understand all the risks involved. But remember, even written material sent from the promoter can be
    fraudulent or misleading.

  • You don’t have to be polite to telemarketers.

    If there’s one thing scammers are good at it’s exploiting the good manners of the potential victim. Remember that a stranger who calls and asks for your money is to be regarded with utmost caution and skepticism. You have absolutely no obligation to stay on the phone with a stranger who wants your money. It’s not impolite to say you are not interested and hang up.

  • Keep control of your money.

    Don’t be taken in by anyone who wants your money and assures you that he or she is a professional and can handle everything. It’s a con artist trick as old as the hills. Beware of any financial professional who suggests putting your money into something you don’t understand. And never let yourself be talked into leaving everything in his or her hands. Does it really sound smart to give anyone unlimited access to your money? I didn’t think so!

  • Keep an eye on your nest egg.

    Never trust anyone who wants you to turn over your money to them and then sit back and wait for results. If you don’t know much about investing, take the time to educate yourself. It will be time well spent. Look statments over carefully and keep an eye out for irregularities. Constant vigilance is a necessary part of being an investor. If that sounds like too much work, investing may not be for you.

  • Don’t let appearances fool you.

    Far too many investors who are wiped out by con artists later explain that the swindler “looked and sounded so professional.” Successful con artists sound extremely professional and have the ability to make even the flimsiest investment deal sound as safe as putting money in the bank. Remember that sincerity in a voice, especially on the phone, has no bearing on the soundness of an investment opportunity. Always do your homework before investing.

  • Don’t let fear drive your decisions.

    Con artists know that many investors, particularly older investors, worry that they will either outlive their savings or see all of their financial resources vanish overnight as the result of a catastrophic event. It’s quite common for swindlers and abusive salespeople to pitch their schemes as a way to build up life savings to the point where such fears are no longer necessary. Remember that fear and greed can cloud your good judgment and tuen your nest egg into a financial trian wreck. An investment that is right for you will make sense because you understand it and feel comfortable with the degree of risk involved. High return almost always means high risk. Any claim to the contrary is highly suspect and should raise red flags.

  • Exercise caution if you’re new to investing on your own.

    Ask a con artist to describe his ideal victim and you’re likely to hear “elderly widow or widower.” Many people now in their retirement years have limited knowledge about handling money. They often relied on their spouses to handle most or all money decisions. Those who have received windfall insurance in the wake of the death of a spouse are prime targets for con artists. People who are on their own for the first time in years should always seek advice of family members or impartial professionals before deciding what to do with their money.

  • Don’t be afraid to ask tough questions.

    Too many investors trust unscrupulous investment professionals and outright con artists to make financial decisions for them. They then compound their error by failing to keep an eye on the progress of the investment.Insist on regular written reports. Check the written information. Look for excessive or unauthorized trading in your funds. Don’t be swayed by assurances that such practices are routine or in your best interest. Don’t permit a sense of friendship or trust to keep you from demanding this information. If you suspect something is wrong and you don’t get satisfactory answers, turn to your state government’s Securities Division for help.

  • Withdrawing money shouldn’t be difficicult.

    If a stockbroker, financial planner, or other individual stalls you when you want to pull out your principal or profits, demand to know why. Since unscrupulous investment promoters have probably pocketed the funds of their victims, they will go to great lengths to explain why your savings are not available. They may even pressure you to “roll over” non-existent profits into new and even more alluring investments. This will only further delay the fraud being uncovered. If you’re not investing in a product with a fixed term, such as a bond, you should be able to receive your funds or profits within a reasonable amount of time.

  • Don’t be too embarrassed to report a crime.

    Many investors that have been bilked by scam artists often fail to report the crime out of embarrassment. Older investors fear they’ll be judged incapable of handling their own affairs and be forced into a nursing home or other facility. Sophisticated investors don’t want to admit that a smooth talker took them in. Con artists know all about such sensitivities. In fact, they’re counting on it because if you fail to report it to the authorities, it’s the perfect crime. Even a delay in reporting increases their chances of getting away with your money scott free. It’s a sad fact that investors seldom recover more than pennies on the dollar of their original investment. In many cases, however, when investors recognized early that they’d been misled, they were able to recover some or all of their funds by being a “squeaky wheel”.

  • Don’t “Reload” and double your loss.

    Younger investors who are ripped off are fortunate in that they have the opportunity to restore some or all of their losses through new earnings. Older investors are dealing with a finite amount of money that is unlikely to be replenished.The resulting panic is well known to con artists. So they have developed schemes to take a “second bite” out of their victims. Faced with a loss of funds, some investors will go along with another scheme (allowing themselves to be reloaded). The con artists promise to make good on the original funds that were lost and possibly even generate new returns beyond those originally promised. This is particularly disastrous for older investors. Though their desire to make up lost financial ground is understandable, all too often the result is a loss of whatever savings they have left.

Investment Schemes

Investment Schemes

Find out how scammers turn your greed against you by visiting our investment scheme section.

1 Response

  1. Carolyn Ricks-Ryder says:

    What constitutes felony fraud vs misdemeanor fraud.

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