Ponzi schemes, pyramids, and pump and dump frauds are but a few of the colorful names given to the multitude of ways to separate people from their money through investment scams. While some of these schemes have involved billions of dollars, most frauds are happy to scam smaller dollar amounts.
According to the U.S. Securities and Exchange Commission (SEC), it is estimated that fraud costs victims $1.32 trillion annually. Due to the secretive nature of fraud, many dollar amounts go unreported, or they are under-reported by victims. The costs could be much higher if the true extent of fraud in the United States was accurately reported.
With the rise of fraud over the past two years, the SEC initiated a program to educate both first-time investors and seasoned professionals on the identification of various red flags of investment fraud to conduct a “do-it-yourself” investigation.
There are other ways to avoid being scammed including:
- Don’t give cash to strangers.
- Investigate fully and seek additional advice before signing a contract or investing money. Remember, in most states you have a three-day “cooling-off period” to change your mind once you have signed a contract.
- Don’t let anyone rush you into a decision, whether it’s on the phone or face-to-face. Don’t be an impulse buyer. Shop around and price items and services. Check Consumer Reports and online forums for feedback on just about any product or service.
- Never discuss your personal finances with strangers. Be wary of phone and email requests to verify your credit card or checking account numbers. Are you 100 percent certain this person is who they claim to be? Did you call them or did they call you?
- The Internet has given rise to a whole new level of con artistry – although the scams are usually variants on the same old tricks. In your email, never click on links or attachments from questionable or unknown senders. Research programs on Google or Yahoo before you install them, to make sure they are reputable,
Yet for most investors, they only become wary of their “too-good-to-be-true” investment after they have invested. I’ve worked with athletes, movie stars, and regular retirees who will invest hundreds of thousands in a company without checking it out only to end up getting burned. I’ve seen cases where the investor was promised a 45 percent return on investment which quickly trickles down to nothing.
On average, my firm conducts between 200 and 300 asset and background searches for clients who have either already invested or plan to invest in a company. Utilizing our sophisticated in-house computer system, Martin Investigative Service can quickly determine whether they are in our database as bad guys.
Are you looking at a possible investment? Have you already invested, but are starting to question your decision? Please let me know and I would be pleased to address your concerns.