CP Medical Clinic | CP Legal Advisor | CP Ladies | CP Kids | CP Sports
Join The Largest Pakistani Community In the Middle East
|Back to Investment Help Center||Back to FAQs|
One of the biggest risks
you face is that of fraud, usually through some investment scheme. But you
can also be defrauded by seemingly legitimate planning, which turns out to
It's a Super Rabbit—Hop
on the Deal
Pyramid investment scams should not be confused with legitimate sales organizations that recruit to expand their sales staff. A characteristic of legitimate sales services is that the emphasis is on the sales of tangible, usable products rather than simply on recruiting new salespeople. The hallmark of illegal pyramids schemes is that participants receive payment for recruiting new members of the sales force rather than for selling products.
The problem with pyramid sales schemes is mathematical. There simply are not enough potential participants in the whole world to keep pyramids growing steadily for even a few months. Danger signs of pyramid scams include:
Welcome to "Crud
Ponzi told investors that he could provide a 40 percent return in just 90 days compared to a measly five percent for bank savings accounts. Ponzi was deluged with funds from investors, taking in $1 million during a single three-hour period. Though a few early investors were paid off in order to make the scheme look legitimate, an investigation found that Ponzi had only purchased about $30 worth of the international mail coupons.
Ponzi worked in the 1920's, but to this day, the Ponzi scheme continues to work on the rob-Peter-to-pay-Paul principle, as money from new investors is used to pay off earlier investors until the whole scheme collapses. In one case, a con artist now serving 12 years in prison told investors that he could buy Mexican pesos for a fraction of their face value and then convert them at full value back into U.S. dollars. Victims in this scheme included members of Kansas churches and Texas motorcycle gang members. The swindler behind the pesos scam took in $27 million, promising investors phenomenal returns of 12 percent weekly 600 percent a year!
Ponzi schemes often have the following characteristics:
The Ponzi of Rock and
One Ohio teenager realized that he could use other people's money to buy rock concert tickets and then turn around and "scalp" them for a 40-50 percent profit or even more. So, the Ohio youngster rounded up his friends to stand in line and buy rock tickets and then scalp them. At first, he ran his business out of the back of a van, but as the word spread, the Ohio youth soon raked in millions of dollars!
When the bubble of this modern-day Ponzi scam burst, the youth would have had to buy every rock concert ticket in Ohio and all surrounding states in order to keep paying out the promised returns to investors. This guy's friends, and their friends, lost money on this scheme.
Examples of precious metals schemes include:
Coin swindles. Swindlers may sell consumers coins that are said to be graded at a higher quality level than is actually the case. Often, these coins are delivered in poor condition or are never sent at all.
Gold mining schemes. How does gold, silver or platinum at dirt-cheap prices sound? That is the promise of swindlers who claim to be able to sell precious metals directly from mines. Claims are made that a new technology will be used to recover microscopic gold that other firms have not been able to retrieve. Regulators sometimes refer to these schemes as "dirt pile" swindles involving promises of "no-see-um" gold, since investors never see the promised precious metals. All they get for their money is dirt.
Bullion deals. How can swindlers avoid delivering when they promise gold bars? One popular stalling tactic: con artists will offer bullion storage services, where a consumer supposedly buys precious metals in bullion form, and then has them stored in a vault. This is an open invitation to fraud. In one major scam, con artists simply pocketed millions of dollars of investor funds and never bothered to buy the gold.
Another popular bullion scheme is bank-financed precious metals or leveraged precious metals. A consumer pays 20 percent of the total cost of gold and then finances the rest, including a heavy dose of interest, storage fees and loan brokering charges. Con artists lie about having connections with major, reputable banks for loan and storage purposes. They simply pocket the money of investors and never buy or store the gold, silver or platinum.
All That Glitters
The company provided storage vaults where investors could view the wall-to-wall stacks of glittering bullion. By the time authorities caught up with the brothers, the only gold was the color of paint on the cardboard used to construct look-alike bars of bullion.
The vault filled with phony gold proved easier to find than the millions of dollars of investors' money. Most of that is still missing.
A penny stock example: con artists convinced investors to put millions of dollars into a company that claimed to have developed a breakthrough technology a self-chilling beverage can that would eliminate the need to store soda and other liquids in a refrigerator. When this deal failed, small investors saw their money go down the drain!
Con artists know that everyone is concerned about losing their money to a swindler. How do they address this issue? One way is to impress a potential victim with their connections and access to special information that makes success inevitable. One such scheme told investors they were chosen from a select group of active investors and financial experts to be a part of the world's most exclusive investment organization. Investors were lured with promises of a constant flow of secret financial information that would create wealth and financial security.
Sound good? Even if it was true, it would be illegal, since trading on the basis of such inside information violates federal law.
Even when U.S. investors deal with legitimate investment opportunities overseas, they remain vulnerable to such factors as loose or nonexistent investor protection regulation, currency fluctuations, limited opportunities to pursue grievances and political instability in some nations. Savvy investors will exercise extreme caution before putting money into any foreign investment situation.
Con artists recognize that the tight-knit structure of many groups makes it less likely that a scam will be detected by regulators and law enforcement officials, and that victims will be more likely to forgive one of their own. Affinity fraud also poses a danger since it undercuts the usual warnings about investment schemes promoted by strangers. In these cases, the fraud may come to a consumer's attention as the result of a contact from a friend, colleague or someone who inspires a bond of trust.
A warning: Swindlers who promote affinity fraud schemes will enlist respected leaders within a community or group to spread the word about an investment deal. So, the key to avoid being a victim in an affinity scheme is to check out everything—no matter how trustworthy the person is who brings the investment opportunity to your attention.
Ads for fraudulent business opportunity schemes may appear in otherwise reputable television programs, newspapers and magazines. Investors incorrectly assume that since the media outlet is reputable, the advertisers are as well, not realizing that the media may not screen its advertisers. Ads for frauds often offer high income to the person who will invest enough to cover individual start-up costs, ranging from $50 to several thousands of dollars. The only people who make money are the swindlers who receive the start-up investment money.
Fraudulent business opportunity ads
frequently appeal to people who have few job skills and are desperate for
money. Examples include work-at-home and animal-raising schemes.
We are a community driven site
- Send your articles, stories and event reporting to
ContactPakistan.com. We publish such contents within 24 hours!
NO POLITICAL REPORTS - WE HAD ENOUGH!
ContactPakistan offers FREE hosting to all community contests.
If you like to sponsor a competition such as sporting events quiz,
Children Essay, Drawings etc. then drop an Email to Webmaster for more
details. We will design complete contest and advertisement campaign Free!!
Let us build virtual community and your business together