First Installment in our multi-part Series

Each year both new and experienced investors fall prey to scams. They are especially vulnerable at the start of the new year, when resolutions to eliminate debt accumulate $$ or make dramatic changes in their lives are prevalent. 

Scam artists do not discriminate.  They go after the rich & the poor, the young and the old.  They don’t care if you mortgage your home, borrow from family, your business or send them the rent money.  They have financially wiped out thousands of people who should have known better and they have done the same to thousands more who couldn’t afford to send them a dime. The more money they can transfer from your account to theirs, the better.

There are two constants regardless of the scam being worked;

1.      The general types of scams don’t change.  The ‘story’ may change and the sophistication level of the scam may vary according to the sophistication of the mark, but the scams themselves stay the same. There are essentially 6 broad categories in the scam world; Ponzi/Pyramid & Affinity, Prime Bank, Promissory Notes,  West African Letter, Pump & Dump, and Offshore/Tax Avoidance

2.      There is a high degree of greed involved.  The scammers’ goal is to incite a normally level headed person to levels of greed they would not normally feel. They generate a sense of ‘entitlement’ in the victim, that ‘other people are making money, why not you’ mentality.  In short, more they can hit the mark’s greed button, the better their chance of successfully separating the mark from their money.

They try to make the victim feel foolish for not buying into their scam. Sort of “you’re a fool if you throw this kind of opportunity away.”

In this multi-part series, we’ll explore each type of scam in detail and offer tips to help you and your families avoid becoming victims.

Here are some of the traits you should be wary of:

·         No written information, or reluctant to provide information on the investment.  Legitimate investments are require a prospectus or a Private Placement Memorandum (PPM)  Keep in mind that the presence of either of these two documents does not mean the investment is legitimate.

·         Guaranteed high investment returns or any guarantee of any kind

·         Claims little or no risk

·         Money guaranteed to be there when you need it (see, I told you about guarantees)

·         Conflicts of interest, especially prevalent when stock is being offered from inventory

·         Any "insider information," such as pending news releases, contract announcements, mergers or product sales

·         If the investment sounds too good to be true it probably is

·         High pressure sales tactics

·         Limited time only, act now or be sorry later

·         Men, scammers love to challenge your masculinity if you ‘want to talk it over with your spouse’ A favorite response is “Who wears the pants in your family?”

·         Secrecy

Our next installment in this series will explore Ponzi, Pyramid & Affinity Scams.  All slightly different variations of the same concept.