investment fraud americans lose an estimated each year to investment fraud $40 billion
TRANSCRIPT
Investment Fraud
Todd Rokita
Indiana Secretary of State
Americans lose an estimated
each year to investment fraud
$40 billion
Why? Lack of financial awareness Poor planning early in life Low rates of return
– Certificates of deposit, savings accounts, etc.
Rash decisions “Easy money” Too trusting Fear
The Victims Include... Doctors
Lawyers
Teachers
College Students
Business People
Retired/Elderly
No one is immune to fraud. Anyone can become a victim.
Outrageous Promises “Double your money in ninety days!”
This is a risk-free guarantee
High reward with low risk
You are lucky to be getting in on the ground floor
Financial Professionals
Unsuitable investments
Poor investment advice
Fraudulent broker acts
Insurance agents/unregistered agents
What Can Be Done?
Report suspicious or fraudulent activities
Check into the investment opportunities and the people selling them
What Can Be Done?
Financial Education
Investigate Before You
Invest
•www.crimes-of-persuasion.com
•www.ihatefinancialplanning.com
•www.fl2010.com
•www.jumpstart.org
•www.econed-in.org
•www.sec.gov
•www.nasaa.org
•www.sos.IN.gov
Investment Myths
High reward with no risk Scams do not happen to smart people .com companies are a sure bet This investment is guaranteed/insured No written information is available No securities license or registration is
necessary to sell this
Red Flags This offer is only good today/this is a
limited-time opportunity
Just give me your credit card and checking account number
This is only available to a select group
I get nothing out of this deal
Red Flags Do not tell anyone -- not even family
I will come to you; you don’t have to come to me
Foreign banks pay great interest rates and have no taxes associated with them
This is “insider” information
Common Types of Fraud Pyramid Schemes
Promoter/Scam Artist
Investor Investor Investor
InvestorInvestorInvestorInvestorInvestorInvestor InvestorInvestor Investor
THE CLASSIC PYRAMID OR PONZI SCHEME
II I II II I I II IIII I I II II I II I II
Level 1Promoter promises large
returns to initial investors toinduce investment.
Level 2Word spreads and more
investors participate.
Level 3The promoter usessome of the money
from laterinvestors to pay off
earlier investors,while keeping therest for himself.
The Result: The scheme eventually collapses.Most of the investors lose their investments becauseinevitably there are not enough later investors to pay
the returns of the earlier investors. The only surewinner is the scam artist.
Tips:1. Be suspicious of promoters promising large returns on your investment in
a short period of time. If it sounds too good to be true, it probably is.2. Don’t be persuaded by enthusiastic testimonies from other investors.
Common Types of Fraud
Ponzi Schemes• Charles Ponzi• Don Pratt
International Prime Bank Schemes• Royal Meridian Bank
Affinity Fraud• The Church of God, Inc.
Promissory Notes• James Carpenter
Common Types of Fraud Unscrupulous Brokers
• Poor advice• Unsuitable investments
Senior Fraud• Variable and charitable gift annuities• Viaticals• Promissory notes
Insurance Agents/Unlicensed Agents• Any agent selling securities must be licensed through the
Secretary of State Todd Rokita’s Office
Avoiding Fraud
Hang up the phone Ask questions! Remember, those touting investments
are not doing it to help you out Contact Secretary of State Todd Rokita’s
Office for information regarding the opportunity and the person offering it
Secretary of State Todd RokitaWe Are Here to Help Hoosiers!
Fraud Hotline (800)223-8791
Website www.sos.IN.gov
Location
302 W. Washington St. Room E-111 Indianapolis 46204
Report Investment Fraud
Check On– Securities– Franchises– Loan Brokers– Exempt Filings– Broker Dealers– Investment Advisors– Enforcement Actions