Scam of the day – March 3, 2017 – Happy birthday Charles Ponzi

Had he not died in 1949, today would have been Charles Ponzi’s 135th birthday.  Scam artists around the world should probably honor the man who perfected the scheme that bears his name that has been used by many scam artists, the only criminals we refer to as artists to steal billions of dollars from unwitting victims who made the mistake of investing their money with him.  Although, Ponzi was not the first to use the technique of paying off early investors with the investments of later investors in an effort to make a total sham look as if it is a profitable business, that dishonor should go to William Miller who first used this scheme in 1899, it was Ponzi in 1920 who perfected the scam to steal millions of dollars from unwary investors in his scheme by which he told them that he was able to take advantage of fluctuating currency values to purchase international postal reply coupons at a discount and then sell them at face value in the United States.  Ponzi promised, and delivered to early investors, a 50% profit on investments within 45 days and a 100% profit within 90 days.  Of course, the entire scheme was a total sham, but eager investors blinded by their greed flocked to him to invest.  Eventually, as ultimately always happens in a Ponzi scheme, the scam was exposed and Ponzi went to prison.  However, the list of criminals still using this prototype of a scam continues to this day including such famous Ponzi scheme criminals as Allen Stanford, Tom Petters, Norman Hsu, Lou Pearlman and, of course, the biggest of them all, Bernie Madoff who swindled people out of more than 50 billion dollars using this time honored scheme.

TIPS

So how do you protect yourself from falling prey to a Ponzi schemer?  There are a number of things you can do including always investigate the credentials of any investment adviser you are considering using.  You can check on individual investment advisers with the SEC, your own state’s securities regulators and the Financial Industry Regulatory Authority (FINRA).  However, that would not have protected you from being swindled by the likes of Allen Stanford or Bernie Madoff.

Another important thing is to never use an investment adviser who is also the custodian of your funds. This is a recipe for disaster.  The role of an investment adviser or manager should be solely that of advising and making trades.  The custodian of the actual investments should be a separate broker-dealer regulated by the Financial Industry Regulatory Authority (FINRA) and backed by the Securities Investor Protection Corp. (SIPC).  Never invest in anything that you don’t totally understand and be particularly wary of investments that promise huge returns or no risk of ever losing money even when market conditions are poor.

Scam of the day – July 2, 2016 – Brexit scams

The economy in general and the stock market in particular react to fear and greed.  The recent Brexit (British Exit) vote of Britain to leave the European Union (EU) has led to a great deal of fear as reflected in the initial tremendous drops in the stock markets around the world.  It also is leading people to be vulnerable due to both fear and greed to the entreaties of scammers offering investments purporting to take advantage of the situation created by Britain leaving the EU.  Fear and greed are scammers best friends because they make people into easier targets.  Scammers are always ready to take advantage of every major event that happens and turn it into an opportunity to scam people and the Brexit vote is no exception.  Scammers are already contacting people with investment “opportunities” to take advantage of their concern about Britain leaving the EU.

TIPS

Before you consider any investment in response to an email, text message or phone call, you should first ask yourself, why is this stranger contacting me to invest in this fool-proof investment that is guaranteed to deliver a huge profit?  You should also never underestimate the power of a fool.  Nothing is fool proof and no investment can guarantee a huge profit.    Before investing with anyone, you should investigate the person offering to sell you the investment with the Securities and Exchange Commission’s Central Registration Depository.  This will tell you if the broker is licensed and if there have been disciplinary procedures against him or her.  You can also check with your own state’s securities regulation office for similar information.  Many investment advisers will not be required to register with the SEC, but are required to register with your individual state securities regulators.   You can find your state’s agency by going to the website of the North American Securities Administrators Association.   You should also check with the Financial Industry Regulatory Authority (FINRA) for information about the particular  investment adviser.  It is also important to remember that you should never  invest in something that you do not completely understand.  This was a mistake that many of Bernie Madoff’s victims made.  You also may want to check out the SEC’s investor education website at www.investor.gov.  Scammers can be very convincing and it may sound like there is a great opportunity for someone to make some money, but you must be careful that the person making money is not the scam artist taking yours.

Too many people invest without doing their homework and end up losing money to scams.  Homework wasn’t fun when you were in school and it isn’t fun now, but it is important to do before investing in anything.

Scam of the day – March 3, 2015 – Happy Birthday Charles Ponzi

Had he not died in 1949, today would have been Charles Ponzi’s 133rd birthday.  Scam artists around the world should probably honor the man who perfected the scheme that bears his name that has been used by many scam artists, the only criminals we refer to as artists to steal billions of dollars from unwitting victims who made the mistake of investing their money with him.  Although, Ponzi was not the first to use the technique of paying off early investors with the investments of later investors in an effort to make a total sham look as if it is a profitable business, that dishonor should go to William Miller who first used this scheme in 1899, it was Ponzi in 1920 who perfected the scam to steal millions of dollars from unwary investors in his scheme by which he told them that he was able to take advantage of fluctuating currency values to purchase international postal reply coupons at a discount and then sell them at face value in the United States.  Ponzi promised, and delivered to early investors, a 50% profit on investments within 45 days and a 100% profit within 90 days.  Of course, the entire scheme was a total sham, but eager investors blinded by their greed flocked to him to invest.  Eventually, as ultimately always happens in a Ponzi scheme, the scam was exposed and Ponzi went to prison.  However, the list of criminals still using this prototype of a scam continues to this day including such famous Ponzi scheme criminals as Allen Stanford, Tom Petters, Norman Hsu, Lou Pearlman and, of course, the biggest of them all, Bernie Madoff who swindled people out of more than 50 billion dollars using this time honored scheme.

TIPS

So how do you protect yourself from falling prey to a Ponzi schemer?  There are a number of things you can do including always investigate the credentials of any investment adviser you are considering using.  However, that would not have protected you from being swindled by the likes of Allen Stanford or Bernie Madoff.  Another important thing is to never use an investment adviser who is also the custodian of your funds. This is a recipe for disaster.  The role of an investment adviser or manager should be solely that of advising and making trades.  The custodian of the actual investments should be a separate broker-dealer regulated by the Financial Industry Regulatory Authority (FINRA) and backed by the Securities Investor Protection Corp. (SIPC).  Never invest in anything that you don’t totally understand and be particularly wary of investments that promise huge returns or no risk of ever losing money even when market conditions are poor.

Scam of the day – October 25, 2013 – Self-directed IRA scams

Self-directed IRAs are a legitimate retirement technique that permits people to invest their IRA money in real estate, precious metals, private placement securities and a number of other types of investments not generally found in typical IRAs which usually are limited to stocks, bonds, mutual funds and Certificates of Deposit.  In order to have a self-directed IRA, you need a custodian for the IRA just as you would with a more traditional IRA.  Unfortunately, scammers are using self-directed IRAs to foist phony investments upon unwary investors.  In addition, since most IRAs, as retirement accounts are generally left to grow and not accessed for years after being set up, the scammers have more time to avoid detection of their crime.

TIPS

You should investigate any investment you are considering before investing and your investigation should include looking into not only the legitimacy of the investment, but also the person who wants to sell it to you.  Be wary of unsolicited investment offers.  Check out the investment and the promoter of the investment with the SEC at www.sec.gov and with FINRA at www.finra.org.  FINRA is the biggest regulator of securities sellers in the country.

Scam of the day – November 7, 2012 – Disaster investment scams

Following in the wake of Hurricane Sandy and tonight’s projected Nor’Easter which is expected to hit many of the areas already devastated by Hurricane Sandy, there will be many scams as scam artists and identity thieves attempt to further victimize the victims of the storm.  I have already warned you about the scams involving phony contractors, phony FEMA representatives, phony insurance adjusters and phony charities, but with history as a guide, you should also be wary of the next round of scams which will take the form of scam investment opportunities.  As previously happened following Hurricane Katrina, you can expect to receive emails and other communications offering to let you in on fool-proof investments in companies that have developed products or are providing services that will be part of the massive clean-up and reconstruction of the storm affected areas.  These investments may be in a revolutionary new type of generator, a water-removal system or other storm related technologies or products.  Many of these investments will be scams and you should be very careful before making private investments.

TIPS

First you must ask yourself, why is this stranger contacting me to invest in this fool-proof investment that is guaranteed to deliver a huge profit?  You should also never underestimate the power of a fool.  Nothing is fool proof and no investment can guarantee a huge profit.    Before investing with anyone, you should investigate the person offering to sell you the investment with the Securities and Exchange Commission’s Central Registration Depository.  This will tell you if the broker is licensed and if there have been disciplinary procedures against him or her.  You can also check with your own state’s securities regulation office for similar information.  Many investment advisers will not be required to register with the SEC, but are required to register with your individual state securities regulators.   You can find your state’s agency by going to the website of the North American Securities Administrators Association.   You should also check with the Financial Industry Regulatory Authority (FINRA) for information about the particular  investment adviser.  It is also important to remember that you should never  invest in something that you do not completely understand.  This was a mistake that many of Bernie Madoff’s victims made.  You also may want to check out the SEC’s investor education website at www.investor.gov.  Scammers can be very convincing and it may sound like there is a great opportunity for someone to make some money, but you must be careful that the person making money is not the scam artist taking yours.

Scam of the day – October 1, 2012 – Self-directed IRA scams

Self-directed IRAs may be a good retirement investment vehicle choice for people who are seeking alternatives to the traditional forms of investments for IRAs such as mutual funds, or CDs.  Among the investments you may choose for including in your self-directed IRA are rental real estate, precious metals, unregistered private securities or even bull semen.  One important element of a self-directed IRA is that you must have an independent, qualified third party act as the custodian for your investments and that’s where the potential for scams come in.  Although there are numerous legitimate, self-directed IRA custodians from which you can choose including the Vanguard group, there also are many scammers who prey upon people seeking self-directed IRAs by promising huge returns for using their services and investment counsel.  Some of these have put on free seminars in which they persuade people to invest with them, but take their money in a Ponzi deal and the investors never see their money again.

TIPS

There are a number of things you should do if you are considering a self-directed IRA.  As always, only invest in investments that you understand.  Unregistered securities can be a risky investment, particularly if you don’t truly understand the companies behind the investments.  Always check out the record of an investment advisor before you do business with him or her.  Go to the SEC’s website, your state securities administrator’s office and the website of FINRA, a private regulatory organization at www.finra.org to look up your particular advisor to see if there have been complaints or disciplinary action against him or her in the past.

Scam of the day – April 22, 2012- Stock picking robot scam

The SEC has just filed charges against two brothers in England alleging that they scammed 75,000 people through a scheme in which they touted a penny stock picking robot that they had developed that could identify stocks about to double in value.  The two twin brothers, Alexander John Hunter and Thomas Edward Hunter began the scam in 2007 when they were only sixteen years old.  The stock picking robot was a scam, but people still paid subscription fees to their newsletter.  Meanwhile, they also sold their services to stock promoters claiming that they could send their stock prices soaring through their newsletters.  Of course, the public was unaware that the twins were using a scam called “pump and dump” by which they tout a stock and temporarily drive up the price while they then sell the stock at the artificially established high price before the stock falls back to its true value leaving the people taking the investment advice with large losses.

TIP

As always, if it sounds too good to be true, it usually is.  Always check out the qualifications of any investment advisor from whom you take advice.  Make sure that you are dealing with someone reputable.  Check with your state’s securities regulator or the Financial Industry Regulatory Authority which maintains a BrokerCheck website.  Also make sure that any investment advisor you use is a member of the Securities Investor Protection Corporation (SIPC).