Investment adviser, Amrit Chahal has hit the trifecta with fraud charges being brought against him by the SEC, the Commodity Futures Trading Commission and the U.S. Attorney’s Office for the Eastern District of Virginia. All of the charges relate to Chahal, an unregistered adviser using his company Kane Capital Investment, an unregistered investment firm promising investors returns of between 28% and 34% all the while failing miserably in his investments and using his clients funds to fund a lavish lifestyle, according to prosecutors. Chahal is accused of defrauding friends and family out of 1.4 million dollars, lying about the profitability of his investments and operating a Ponzi scam. This scam is a good example of what is called affinity fraud where people put undeserved trust in someone offering an investment opportunity because that person is “someone like me.”  Affinity fraud works because people trust other people who may share a common bond, such as family, religion or some other group affiliation.   The list goes on and on.  Scammers take advantage of every connection they can make with their victims to gain their trust and then steal their money.
TIPS
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’s securities regulators.   You can find your state’s agency by going to the website of the North American Securities Administrators Association. In this case, neither Chahal nor his company were registered advisers.
You should also check with 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. Among Chahal’s investments were complex oil futures contracts.  You also may want to check out the SEC’s investor education website at www.investor.gov.
Of course, you always should be skeptical of investment advisers that promise huge returns of 28% to 34%. If it sounds too good to be true, it usually is.
In addition, a red flag in both the Bernie Madoff scam and the scam of which Chahal is accused is when the person advising you to make the investment is also the custodian of the account.  They should never be the same person. Chahal operated in both capacities and was able to falsify records to temporarily hide his fraud. Always have a separate broker-dealer hold your investments in addition to your individual adviser.  This way the actual funds and investments are monitored by a third party.
If you are not a subscriber to Scamicide.com and would like to receive daily emails with the Scam of the day, all you need to do is to go to the bottom of the initial page of http://www.scamicide.com and click on the tab that states “Sign up for this blog.”