Tuesday, December 23, 2014
Beware Of Investment Scams
The idea of turning one's cash into a larger amount of money is a common wish. With investing, this becomes possible in the free market system. Unfortunately, there are many different types of scams that criminals have created in order to take advantage of this desire. Being aware of the common versions of these schemes will give one a greater defense against falling victim to one of these crimes. Many investment scam artists use the telephone to make the initial contact with their victims.
By describing the scheme in a flowery, overly optimistic way, they often convince people to hand over their banking information in order to invest in penny stocks. After exaggerating the value of the stock to the victims and getting them to purchase a large number of shares due to them being so cheap, the cost of the stock soars. Then, the scam artist will sell off all of his or her shares, causing the worthless stock to crash.
This is called the "pump and dump". Similarly, after making initial contact via the phone or email, a scam artist will try to entice a person into giving their banking information in order to invest in offshore companies, buy promissory notes, pay a transaction fee or a deposit for an investment, or by engaging in exchanging foreign currencies. Normally after obtaining the victim's private financial information and making one or more large withdrawals, the scam artist disappears from contact and is not heard from again by the victim.
Ponzi schemes are another common trick used by these types of criminals. By using the money collected by later investors to continue paying the earlier investors, the scheme can grow immensely and can go on for quite some time before being discovered. However, once there is a dramatic slow down in new investors, the Ponzi scheme will collapse. A sure sign that if an investment opportunity is being offered is a scam is by the claim that the scheme is "IRS approved or "IRA approved". Neither organization makes such endorsements.
By staying vigilant and remaining suspicious of any unsolicited contact concerning one's private finances, one can avoid being a victim of these types of crimes. Always question the veracity of any claim made by an individual attempting to obtain your banking information and ask questions about the company contacting you and how they found your contact information.
Jonah Engler is a NYC entrepreneur and understands the severity an Investment Scam can pose on your financial life.