Longtime Scamicide readers will remember that I have written many times about a wide variety of investment scams.   There are many different investment scams, but generally, people often become victims of investment scams when they invest in things that they don’t understand (a common thread with victims of Bernie Madoff), fall victim to affinity fraud by investing with someone merely because they share a similar background, invest with someone who is both the broker and the custodian of the asset which enables the scammer to be able to control the investments and the records of the deposits or fail to investigate the investment advisor before investing.  Today’s Scam of the day, however, deals with a convicted investment scammer Michael Barry Carter whose crimes were perpetrated on victims who shared none of those characteristics.

Carter had been an employee of the large and legitimate brokerage company Morgan Stanley in Virginia.  While working for Morgan Stanley, he stole at least five million dollars from his clients’ accounts through unauthorized transactions which he accomplished through forged bank authorization forms.  Carter used the stolen money to pay for his lavish lifestyle.  It wasn’t until one of his victims went to get a loan that the client became aware that an $800,000 loan had already been obtained in the victim’s name and the proceeds of the loan were able to be traced to Carter’s personal accounts.  At that point, after further examination, the total extent of Carter’s criminal activities became known.  Carter has pleaded guilty and will be sentenced on November 9th.

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. https://www.nasaa.org/investor-education/how-to-check-your-broker-or-investment-adviser/ Many investment advisers will not be required to register with the SEC, but are required to register with your individual state securities regulators.  You should also check with the Financial Industry Regulatory Authority (FINRA) for information about the particular  investment adviser. https://www.finra.org/investors/protect-your-money/ask-and-check

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. Additionally, investing with someone merely because you trust them because you have heard them on the radio or television is dangerous.  Having the same person advise the investment and control the investment is a common thread among Ponzi schemers because it enables them to falsify documents to make the investment look profitable. Generally, for additional security it is desirable to have a separate broker-dealer act as custodian for investments chosen by an investment adviser.

The lesson for investors to protect themselves from scammers such as Michael Barry Carter is to carefully review all of your financial records regularly and to monitor your credit reports regularly as well.  In addition, it is always a good idea to freeze your credit at the three major credit reporting agencies.  If the victims of Carter had frozen their credit, he would not have been able to get a loan in their names and if they had been monitoring their credit reports they would have discovered his crimes earlier.

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