Investment Scams

1. Investment Scams Ian Stock Yekaterina Konyreva

2. NASAA's (North American Securities Administrators Association) Top 10 Investment Scams and Traps! Products: • Exchange-Traded Funds - some not liquid contain traps&complexities • Foreign Exchange Trading Schemes • Gold and Precious Metals - GOOD OLE TOM, holds gold in vault and sells when it appreciates in value  • Green Schemes - investment oppurtunities based on dev of green tech • Oil & Gas Schemes - alternative to stock market investing Practices: • Affinity Fraud • Undisclosed Conflicts of Interest •  Private or Special Deals - private or "special" clients, just steal $ •  "Off the Book" Deals - on the side deals. Illegal and risky usually • Unsolicited Online Pitches- facebook (vile yeti), twitter (vile yeti), craigslist, YouTube... pump and dump & ponzi schemes

3. Ponzi Schemes In the early 1900's, Charles Ponzi, swindled $10 million from investors by promising them a forty percent return. The scam promises high returns to investors and uses their money to pay their previous investors. They require a constant flow of cash to stay alive, but unlike pyramid schemes; they generally don't have to recruit new investors to earn a share of the profits. According to NASAA, Ponzi scammers tend to blame government intervention for their failures. Ponzi schemes generally collapse when they run out of attracted investors or when too many attempt to take their money out - during economic troubles, for example.

4. Pyramid Schemes - almost a Ponzi Scheme A pyramid scheme is similar to a ponzi scheme in that the scammer claims they can take small investments and make them into large profits in a small amount of time and they need a steady flow of cash to stay in the game. Although for pyramid schemes the only way they make money is by recruiting new victims into the system. As shown before you, Pyramid schemes commit seppuku with great haste. Once the numbers reach that impossible point, the scheme falters, and stops entirely. At least one would think so.

5. Advance-Fee Fraud These for the most part involve a reversal of a purchase mistake, usually a low-priced stock. The scam generally begins with an offer to pay a price high enough to entice you to sell that worthless stock in your portfolio. To take the deal you must send a fee in advance for the service (a trick revealed!!) - and of course when you send the money you never get it back. Shame isn't it?

6. Senior Investment Fraud Low investment rates, rising healthcare costs, and increased life expectancy make seniors targets for scammers. • Ponzi schemes • charity • unregistered securities 

7. Foreign Exchange Trading Schemes • Trading in foreign currencies requires resources that most individual investors don't have. Scammers profit by charging high commisions or selling investment strategies, assuming trades are actually made. In some cases, the "vile yeti" saleman/promoter of this, claim they have propriety software programs that allow them to beat the market - which isn't actually the case. Generally they just steal the money. • Or in the case of the Iraqi Dinar, investors are enticed topurchase dinars for huge amounts of interest, possibly up to 1000%, when the currency appreciates in value - sometimes because they claim a U.N. or World Bank program will revalue it.

8. Affinity Fraud and Undisclosed Conflicts of Interest • Affinity Fraud: Scammers use their victims' religious or ethnic identity to gain their trust and take their savings. They use techniques such as "gifting" programs at churches to foreign exchange scams. • Undisclosed Conflicts of Interest: When obtaining investment advice about securities, investors need to know that not all advice is given with their best interest at heart, alas. Some salespeople can receive profitable commissions when they sell a product that is risky or inappropriate for an investor, but don’t have to disclose that financial incentive. Investors should demand that anyone giving advice or recommendations disclose how they are compensated.

9. Pump and Dump • Schemers try boosting the price of stocks by false, misleading information. This way they make a huge profit by selling their cheap stock. • These usually occur on the Internet where its common to see messages that tell readers to buy or sell stocks before the price goes down. •  The schemers say that they have inside information on stocks and which stocks would be the best for you to purchase.

10. Specific Red Flags of EVIL! • Guarantees: Be suspect of anyone who guarantees that an investment will perform in a specific manner. All investments carry some degree of risk. • Unregistered products: Many investment scams involve unlicensed individuals selling unregistered securities; ranging from stocks, bonds, notes, hedge funds, oil or gas deals, or fictitious instruments, such as prime bank investments. • Overly consistent returns: Any investment that consistently goes up month after month; or that provides remarkably steady returns regardless of market conditions; should raise suspicions, especially during the hills and valleys of economic life. Even the most stable investments can experience quakes once in a while. • Complex strategies: Avoid anyone who credits a overly complex investing technique for strange success. Legit professionals should be able to explain clearly what they are doing. It is critical that you fully understand any investment you’re seriously contemplating; including what it is, what the risks are and how the investment makes money.

11. EVIL! Continued... • Missing documentation: If someone tries to sell you a security with no documentation the "vile yeti" creature may be selling unregistered securities. The same is true of stocks without stock symbols. • Account discrepancies: Unauthorized trades, missing funds or other problems with your account statements could be the result of a genuine error OR they could indicate fraud. Keep an eye on your account statements to make sure account activity is consistent with your instructions, and be sure you know who holds your assets. For instance, is the investment adviser also the custodian of your assets? Or is there an independent third-party custodian? It can be easier for fraud to occur if an adviser is also the custodian of the assets and keeper of the accounts. • A pushy salesperson: No reputable investment professional should push you to make an immediate decision about an investment, or tell you that you need to “act right meow.” If someone pressures you to decide on a stock sale or purchase, evade the target!! Even if no fraud is taking place, this type of pressuring is inappropriate and vile. Vile yeti attack!!!

12. How to Avoid Investment Fraud • Choose a money manager who is well-known, regulated by the Securities and Exchange Commission (SEC), and who has been in the industry for several years. • Beware any money manager who wants total control of all your money. • Choose everyday investments that can be bought and sold through well-known brokerage firms or mutual fund companies. Make sure your statements come from your brokerage firm, not the individual money manager. • Make your checks out to your brokerage firm, not to an individual money manager or a company that person controls. • Watch out for promises of high or unusually steady rates of return. A strategically placed video clip.

13. "Vile Yeti" Tactics • The "Phantom Riches" Tactic:dangling the prospect of wealth in front of you, enticing you with something you want but cannot have. "These gas wells are guaranteed to produce $6,800 a month in income." • The "Source Credibility" Tactic:trying to build credibility by claiming to be with a reputable firm or to have a fantastic credential or a lot of experience. "Believe me, as a senior vice president of (insert name here) Firm, I would never sell an investment that doesn't produce." Or would they...

14. "Vile Yeti" Tactics continued • The "Social Consensus" Tactic:leads you to believe that other savvy investors have already invested. "This is how (insert name here) got his/her start. I know it's a lot of money, but I'm in and so is my mom and half her cult and it's worth every dime." • The "Reciprocity" Tactic:offering to do a small favor for you in return for a big favor. "I'll give you a break on my commission if you buy now! Half off!" • The "Scarcity" Tactic: creating a false sense of urgency by claiming limited supply of the service/good. "There is only 1 unit left, so I'd sign today if I were you! RIGHT MEOW!

15. Bibliography http://www.atg.wa.gov/SeniorFraud/InvestmentScams.aspx http://www.investopedia.com/university/scams/scams1.asp http://articles.moneycentral.msn.com/Investing/StartInvesting/Top10investingScams.aspx http://www.myretirementpaycheck.org/fraud/common-types-of-fraud.aspx http://www.ethicscheck.com/consumers/scamreport/rpt_10_05_22.htm http://www.nasaa.org/nasaa_newsroom/current_nasaa_headlines/13048.cfm http://www.scamdex.com/financial-investment-scams.php http://www.finra.org/investors/protectyourself/investoralerts/fraudsandscams/p118010 http://saltlakecity.fbi.gov/multimedia/fraud052410/fraud052410.htm http://www.fbi.gov/scams-safety/fraud http://www.sltrib.com/sltrib/money/50960272-79/investment-fraud-utah-state.html.csp

16. Quiz Thing - Questions 1. What does NASAA stand for? 2. What does SEC stand for? 3. What does FINRA stand for? 4. When a salesman tries to well, sell you something - and they're pushing for a quick buy from you, what should you do? A. Nothing                             C. Don't invest in their product  B. Unleash your attack dog  D. Make Porkchop sandwiches 5. What will happen to pyramid schemes after long periods of time? 6. When you are GUARENTEED a return on an investment, what should you immediately think? 7. What's the main difference between a Ponzi scheme and a Pyramid scheme?

17. Quiz Thing - Answers 1. North American Securies Administrators Association 2. Financial Industry Regulatory Authority 3. Securities and Exchange Commission 4. C is the correct answer. Although I wish it was D. 5. They will falter and stop entirely, people losing money. 6. That this salesperson is most likely a "vile yeti" or a false pitch that will get you nothing but lost cash. 7. A pyramid scheme turns small investments into large profits within a short period of time, and require the recruitment of new victims to pay off the old ones. A ponzi scheme is very similar to a pyramid scheme but doesn't necessarily need to recruit new victims, but keep a constant flow of cash to stay alive.