Common Investment Fraud Schemes to Avoid

Common Investment Fraud Schemes to Avoid

When a person is investing their hard earned money the last thing that they want is to become a victim of fraud and having all of their money disappear with little or no hope of having it returned to them.  There are common fraud schemes and investors should be aware of them before they invest.

  1. The legendary Ponzi scheme

The Ponzi scheme is also known as the pyramid scheme. These schemes come in various forms whether it is to make big money working from home, it’s a ‘chance’ to turn $10 in to $10,000 in a short amount of time, or it is an investment, that does not actually exist, that is only available for a select group of people.  All of these schemes rely on people recruiting other people to cycle the money, when people stop joining the promoters of the investment will disappear taking whatever money there is with them.

  1. Offshore investing scam

Not all international investing is a scam, however the promoters of this type of scam are requesting you to send your money ‘offshore’ in order to make the best return and avoid taxes.  Be mindful of this type of scam, because if you move your money offshore then you might actually end up owing the government money in back taxes as well as if the money is in a country that is experiencing unrest you may never see those funds again.  Check with an investment fraud attorney such as if you have any suspicions.

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  1. Advance fee scam

The victim of this scheme is convinced to pay money up front in order to take advantage of an investment that promises a huge rate of return on the investment.  Promoters of this scam will actually target previous victims of investment fraud stating that they can work the investment so they will receive their lost money back and then some.  Once someone hands money over to the scammers the victim never hears from the people again.

  1. Pump and dump scheme

This scheme specifically targets those people are investors in the stock market.  The scammer owns stock in a failing company and convinces several people to also invest in the failing company.  The victim is comforted that the person suggesting the stock owns a large stake in the company and invests.  When enough people invest and the stock reaches a certain price level the scammer sells the stock causing the stock to plummet and now the stock everyone else holds is completely worthless.

  1. Pension scam

The pension scam is to target people with retirement savings such as those people who have a company 401k or a traditional IRA.  With these types of accounts the person who owns the account is not allowed to conduct withdrawals from the accounts without penalty until they reach a certain age.  The scammers will convince the victim that they can receive a loan from these accounts by selling off the investments that they have and purchasing shares in a start-up company, the start-up company is worthless and a loan is never received.

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