Offshore "Opportunities"
Certainly, there are legitimate stocks for international
companies. But if you are solicited by an offshore
offer, chances are it's a fraudulent one. Offshore fraud
is great for criminals, because it makes them harder to
catch, and money that goes into offshore accounts can be
a lot more difficult to find. As a rule of thumb, any
investing offer that comes to you by email is a fake:
real companies sell real stock through real stock
exchanges or well-known brokerage firms. Companies that
claim to be "offshore" are scams that rely on potential
investors who think that having their investments hidden
away is exotic or somehow safer from things like taxes.
Pump and Dump
We already referred to this scam, but because it's such
a common one, it makes sense to give a little more
detail here. Basically, someone sends an email or posts
a message claiming to have an insider tip or to have
some genius for stock picking. The writer tells readers
to buy right away, because something wonderful is about
to happen and your profits will be enormous. If you
already own the stock, you may be told to sell
immediately, because the price is about to go down the
drain. The person doing the writing is either being paid
by the company to jack up the price of the stock to
unreal heights, or intends to buy the stock after
artificially deflating it. Either way, the innocent
investor loses his or her money.
Risk Free!
If there is a "guaranteed" return, you're not looking at
an investment opportunity; you're looking at a way to
lose your money for good. The nature of investing is
that there is always risk; sometimes more, sometimes
less. We'll talk about levels of risk later on, but what
you need to know right now is that if an offer claims to
be risk free, it's because it's a scam. It may claim to
be a fabulous new tech invention, or an alpaca-breeding
operation, or a new car air freshener, but one thing's
for sure: it's a fraud.
In 2005, the California Department of Corporations,
which is the securities regulator for the state, issued
a list of the top "Dirty Dozen" investment scams for the
year. These scams included the Ponzi or pyramid scheme
discussed earlier: they also included scams targeting
seniors, military members and members of discrete
cultural, religious or ethnic groups.
Annuities made their way onto the list, as this
traditionally "conservative", low-risk, low return
accounts have been recreated by unethical brokers as
vehicles for nasty and undisclosed commission and
surrender fees. Annuities are especially tricky because,
while they may be sold by actual brokers, if the broker
is dealing dishonestly with clients, people find
themselves paying high and unforeseen costs for
something that looks legitimate. The embarrassment may
prevent some people from seeking help, but if you are a
victim of this type of fraud, report it to your local
securities regulator. Chances are, you aren't alone.
Tsunamis and hurricanes always spawn fake charity scams
and frauds related to bonds as well. Charity scams may
also be a front for attempts to steal your financial
information (like bank account logins) from your
computer. If you get email related to charity or
investments related to natural disasters, it may well be
coming from a con artist.
Viatical contracts are a strange and high-risk
investment at the best of times. Investors are paid a
portion of the death benefits attached to life insurance
policies. Most of the time, viatical settlements are
scams and will result in the total loss of the
investment—the broker just steals it. Although viatical
contracts could theoretically be legit, they usually
aren't.
Other scams in the "Dirty Dozen" included affinity group
fraud, where the con artist pretends to be a member of a
particular ethnic or religious group in order to
perpetrate financial fraud, stock tips scams, high-yield
CD offers that turn out to be something else, and online
escrow frauds. The old bait-and-switch features
prominently in many scams: you are offered one product,
but wind up buying something else; terms and conditions
change once you've made your investment; a great offer
turns into identity theft.
One of the fascinating things about online fraud is that
there is no particular profile of an investment fraud
victim. Old, young, rich, poor, savvy or stupid, all
sorts of people fall into the traps laid by online
scammers. It's a numbers game, and the capability of
sending millions of emails, posting a website for all
the world to see, at the touch of a few keys means that
con artists will continue to con people out of their
money. The simplest way to prevent online fraud is to
delete any email that comes from someone you don't know:
never to click on a link from such an email if you do
accidentally open one; never to believe what you read in
bulletin boards, websites or newsletters unless they
come from an indisputable source, and never to send your
money or financial information to someone with an offer
that sounds too good to be true.
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