Investment Scams are among the oldest cons. Targets are presented with a “business opportunity” in which they not only see no return on their investment but loose their initial investment money as well. The following scams are among the most common investment frauds being perpetrated in the market today. If you recognize any of the red flags in this list while perusing an investment opportunity, bail out of it and contact the authorities.
1. Ponzi Schemes: This scam promises high returns to investors, then uses their money to pay previous investors, skimming off the top as they go. This “classic” scam is named for turn of the century conman Charles Ponzi,
2. Internet Fraud: According to NASAA, Internet fraud has become a booming business, with hundreds and thousands of victims that have been bilked of $100 million. Con artists can now reach millions of potential victims at minimal cost. The infamous Nigerian 419 scam is a common “dot-con”.
3. Affinity Fraud: Some scammers use their victim's religious or ethnic identity to gain their trust and then steal their life savings, using techniques that range from "gifting" programs at churches to foreign exchange scams.
4. Crooked Stockbrokering. When share prices tumble, unprincipled brokers may resort to fraud, bilking clients via unexplained fees, unauthorized trades and other irregularities.
5. Bogus Promissory Notes: “Independent insurance agents” or nonexistent companies often sell these short-term debt instruments, which typically promise high returns with little or no risk.
6. Unlicensed Security Sales: scam artists sell investments that promise high returns with little or no risk. Investors approached by an independent agent should first call the state's securities regulator and ask if the salesperson and the investment being offered are licensed. Even if the licenses are in order, investors should review the any investment opportunity with a healthy skepticism
7. "Prime Bank" Schemes: Con artists promise investors triple-digit returns through access to the secret" investments used by the Rothschilds, the Saudi royalty and investment portfolios of the world's elite banks. These don't exist. Purveyors of these schemes often target conspiracy theorists.
8. Mutual Fund Scams: These frauds hurt “Main Street” investors while creating special opportunities for certain privileged mutual fund shareholders and insiders.
9. Variable Annuities. These scams revolve around the omission of disclosure about costly surrender charges and steep sales commissions. Variable annuities are often pitched to seniors through investment seminars, but variable annuities are actually most suitable for consumers who can afford to have their investment locked up for 10 years or longer.
10. Defrauding Senior Citizens: Seniors' pensions and IRA’s make them irresistible targets for con artists peddling investment scams, such as Ponzi scams, unregistered securities, promissory notes, charitable gift annuities and viatical settlements.