It is interesting to note that when it comes to investment scams, sophisticated investors are often the victims.  This was true in the Ponzi investment scam of Bernie Madoff and it was true of the investment scam of recently convicted David Rose.  Rose specialized in scamming doctors and dentists who he lured into investing in, what they thought, were companies doing research and development in the medical field.  Rose was, as many scam artists are, a slick operator.  He met with clients and provided them with private placement memorandums that described in detail how the money was to be invested.  Unfortunately, of the two million dollars he took from investors, none of it was actually invested in anything.  Instead, Rose used the money to buy luxury boats and cars, jewelry as well as for other personal uses.


The rules for protecting yourself from investment scams are always the same.  Before investing in anything, you should make sure you understand the investment and carefully investigate both the investment and the person advising you to make the investment.  In addition, a red flag in both the Madoff scam and the Rose scam is when the person advising you to make the investment is also the custodian of the account.  They should never be the same person.  Always have a separate broker-dealer from your individual adviser.  This way the actual funds and investments are monitored by a third party.