scams and swindles

8/9/2019 Scams and Swindles

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An Educational Guide to

AvoidingInvestment Fraud

Scams AND Swindles


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Investment pitches come at usfrom a variety of sources. Some

arrive by telephone in the formof a telemarketer. Some arrive in

your e-mail inbox. Some appear in an advertisement in your newspaper or favorite magazine.Still others enter your livingroom late at night through your television in the form of aninfomercial. And some evencome from a co-worker, friendor neighbor.

But no matter how you hear or read about these investment

opportunities, be very careful. Although some may be legitimateoffers, many of these investmentopportunities are scams designed

with the sole purpose of sepa-rating you from your money.

You must act nowbecause this incredibleopportunity wont last long!

We guarantee you will see

big profits!

Double your money in six months

with absolutely no risk!

Scams AND Swindles

An Educational Guide to

Avoiding Investment Fraud


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What You Should Know About Investment Fraud

Anyone can be a victim of investment fraud.

Although you may think only widows, retirees and low-income

wage earners are the targets of investment fraud, swindlers donot discriminate. Professionalathletes, successful businessexecutives, political leaders,doctors, lawyers and even econo-mists have all fallen victim toinvestment fraud.

In fact, some swindlers specifi-cally target persons with deeppockets, while others deliberately seek out families that may have

limited means or financial diffi-culties, figuring such personsmay be particularly receptive toa proposal that offers fast andlarge profits.

Although victims of investmentfraud can differ from one another in many ways, they do have onetrait in common: greed thatexceeds their caution.

Lets face it. We all want to havemore money to pay bills, to

send our kids to college, to travel,to retire comfortably. Sometimesthat desire for money clouds our

judgment, leading us to disregard what our common sense istelling us and believe insteadonly what we want to believe.

If you think

this could never happen to you,think again!

Fraud artists are skilled liars.

Swindlers are very good atsounding like they representlegitimate businesses. Never assume that youll know a scam

when you hear one. Swindlersconvincingly offer attractiveinvestments, products andservices, sell subscriptions,promote travel and vacationplans, and solicit donationsthelist seems endless. Even if youalready know the most common

schemes, innovative swindlersconstantly devise new ones.

No matter what questions, or how many, you askskilled swindlershave believable answers. Thats

why sales pitches from personsor organizations that areunknown to you should alwaysbe carefully investigated before

you buy or invest.

Even if you already know the most

common schemes,

innovative swindlersconstantly devisenew ones.

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The swindler wantsto be your friend.

Many victims of investment scamsreport that the swindler seemedlike such a nice person. Its true.Swindlers are very friendly --initially. They listen to your per-sonal problems. They call back

when they say they will. They seem to really care about you.Unfortunately, the friendship endssoon after they get your money.

High-pressure sales tactics.

The sales pitch may begin on afriendly note, but if the swindler senses that you will not be aneasy-sell he may shift to a hard-sell approach. Some swindlersmay resort to insult or argument,questioning your intelligence or

warning that youll never get rich without taking a chance.

A demand for an immediate decision.

Swindlers always seem to have an

answer for any question you may have regarding the investment.

And if you show any hesitation,swindlers often insist that youshould or must make your deci-sion right now.

An offer that soundstoo good to be true.

The oldest advice is still thebest: if it sounds too good to betrue, it probably is. You shouldbe aware, however, that somecrooks are very sophisticated.

Characteristicsof an Investment Swindle

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They say things that sound justreasonable enough to keep you

interested.

A request for a credit card number other than tomake a purchase.

A fraudster may ask you for your credit card number for identifi-cation or some other plausiblereason. Whatever the ploy, once aswindler has your card number,

you will likely see unauthorizedcharges appear on your statement.

An offer to send someoneto pick up the moneyor any other scheme toget to you more quickly.

This may be part of anurgency pitch. It may also bean effort to avoid federal mailfraud charges by bypassingpostal authoritiesor simply an attempt to get your money before you change your mind.


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A promise that something is free.

This is often followed by anexplanation that a tokengood faith payment is requiredon your part. While honestfirms may indeed promote free

offers to attract customers,swindlers usually ask you to pay something to get whatever isfree. Whatever you receivefree, if anything, will probably be worth much less than what

youve paid for it.

An investment that iswithout risk.

Except for obligations of theU.S. government, all invest-

ments have a degree of risk.Think about it! If there wereany such thing as a completely risk-free investment, with bigprofits assured, do you think the swindler would want toshare that information with additional investors?

Refusal to provide written information or references

you can contact.

Swindlers give many reasons why they cant comply with such requests: There isnt timefor that, or its a new offer and

the printed material is not avail-able yet. Remember, even with references, be cautious.

A suggestion that youmake a purchase or investment based on trust.

Trust me, the caller says. But,although trust is indeed a laud-able trait, it should not be givenindiscriminatelycertainly not

to unknown persons asking for your money!

There isnt time for that, its anew offer . . .

Ponzi/pyramid schemes

This is one of the oldest andmost often used investmentschemes because its proven to

be one of the most lucrative. Ina Ponzi operation, the swindler initially approaches a small num-ber of people and convincesthem to invest in his program.He then widens his net and usesthe money he receives from asecond group of investors to pay large profits to the originalgroup. The original group,buoyed by their success, tellsmore friends about this lucrative

opportunity. The number of investors continues to grow andthe swindler continues to collectmore money. Then, he abruptly disappears.

Internet stock tips

This is also known as the pumpand dump scam. Swindlers sendspam emails recommending that

you buy a companys stock.Usually, the email tells you to get

in now while the stock price isstill low. When you and other

victims like you buy the stock,

the demand for the stock risesand so does the price. Thats

when the swindlers sell off their shares, leaving you with worth-less stock. These types of scamscan also be found in onlineinvestment newsletters andonline bulletin boards.

Seasonal trading in oil and gas

If a broker claims that there are

seasonal tendencies in heatingoil or unleaded gasoline or any other market, and that you canmake a lot of money becausepeople need to heat their homesin the winter or use more gaso-line in the summer, be suspi-cious. Usually, by the time youget into the energy market, themarket has already factored inany seasonal demands.

Common Types of Investment Fraud


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Affinity fraud

Swindlers often target groups with common interests (ethnicgroups, clubs, associations, reli-gious groups, etc.) becausepeople tend to trust someone

who is like them or has similar

interests as they do. Dont letthe fact that the offer comesfrom someone who has thesame ethnic background or belongs to the same church as

you do cloud your judgment.

Dont be pushed into a quick decision.

There may be times when you will want to make a prompt

decision. But those occasionsshouldnt involve making a finan-cial commitment to purchase aproduct or make an investment

youre not familiar with from anindividual you dont know. Nopurchase decision should ever be made under pressure.

Always request written information .

Ask about the product, service,

investment or charityandabout the organization offeringit. This should not be a problemfor legitimate firms. Swindlers,however, may not be willing toprovide such materials and willnot want to risk exposure tolegal or regulatory authorities.

Also, insist on having enough time to study any information

you receive before being con-tacted again.

Never make any investment or purchase

you dont fully understand .

The globalization of the markets

and the widespread use of theInternet have resulted in almostlimitless investment and productopportunities. But that diversity includes the bad as well as thegood. Swindlers seek individuals

who dont know what they arereally doing, and they oftenattempt to flatter prospectsinto thinking they are makingan informed decision. Unless

you understand completely the

product or investment you arebuying, you can suffer seriousfinancial loss.

Youll never get rich without taking a chance.

How To Avoid Becoming A Victim

Trust me.I would

never give you bad

advice.


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Ask what state or federal agencies the firm is regulated by and with

whom it is registered.

If you get such information, ask for a phone number and addressso you can contact the agencies

and verify the facts. If the firmsays theyre not subject to regis-tration or regulation, watch out!Increase your level of cautionaccordingly.

Check out the company or organization carefully .

Swindlers seldom provide you with information about their company. They know that mostpeople do not carefully check or

contact a regulatory agency untilit's too late...until they havealready been "taken." Prove them

wrong! Do your research!

Ask what recourse you would have should youmake a purchase and are not satisfied .

If there is a warranty or refundprovision, it is essential to have itin writing as well as to be fully

satisfied that the business willhonor its guarantees, should thatbecome necessary.

Beware of testimonials youhave no way of checking .

They may provide nothing more

than a con who is paid to speak well of a product, service or organization. There are many

ways to check the legitimacy of an enterprise, and it is your responsibility to use the many resources available to becomean informed and responsibleconsumer.

Beware of fake Web sites.

Swindlers are becoming more

and more sophisticated in their schemes. Some have developedfake Web sites for their companiesand products. Some have evendeveloped fake Web sites claimingto be the federal agency responsi-ble for regulating their company.

Always do your research andfully understand the agency or organization that has regulatory authority for the type of invest-ment you are considering.

. . . if it sounds too good to be true,it probably is.


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2007 National Futures Association All Rights Reserved.

No part of this pamphlet may be reproduced, stored, or transmitted by anymeans, including electronic, mechanical, photocopying, recording, or other-wise, without written permission from National Futures Association. Thepublication is designed to provide accurate and authoritati ve information inregard to the subject matter covered. While great care was taken in thepreparation of this pamphlet, National Futures Association disclaims anylegal responsibility for any errors or omissions and disclaims any liability forlosses or damages incurred through the use of the information in the book.If legal advice, financial advice, or other expert assistance is required,the services of a competent professional person should be sought.

National Futures Association is a congressionally authorized self-regulatory organizationof the United States futures industry. Its mission is to provide innovative regulatoryprograms and services that protect investors and ensure market integrity.

NFA has prepared this pamphlet as part of its continuing public education efforts toprovide information to potential investors.

PUBLISHER

National Futures Association800-621-3570 www.nfa.futures.org

DESIGN

Lenz Design Chicago, Illinois www.lenzdesign.com

ILLUSTRATION

Philip Nicholson Varberg, Sweden www.illustrations.se

Dont provide personal financial information.

This applies especially to creditcard and bank account informa-tion. The only time you shouldgive anyone your credit cardnumber is after you have firmly

decided to make a purchase and want to charge it to that account. Always be cautious and be certain you are dealing with a reputablecompany.

Just walk away .

If the swindler is using the tele-phone to market his scams, justhang up the next time he calls. If the offer comes from an email,delete it. If the infomercial

sounds too good to be true,switch channels.

Be smart.

Dont be scammed!

R E S O U R C E S

If the investment offer involves futures,contact NFA (www.nfa.futures.org) tosee if the company is registered with

the Commodity Futures TradingCommission (www.cftc.gov).

If the investment offer involvessecurities, contact the NationalAssociation of Securities Dealers

(www.nasd.com) to see if the companyis registered with the Securities and

Exchange Commission (www.sec.gov).You can also contact your states

securities agency (available throughthe North American SecuritiesAdministrators Association at

www.nasaa.org).

Additional Resources:

National Fraud Information Centerwww.fraud.org

Alliance for Investor Educationwww.investoreducation.org

Investor Protection Trustwww.investorprotection.org

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