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Saturday, March 28, 2009

Top 10 Investing Scams

Of course there can be no control over the government scamming us as taxpayers, we do however have the power to avoid the private scams that are perptrated against us as investors. Making smart decisions about money is most often avoiding what not to with money as contratsed with what to do with money. Always remember that the #1 sales technique is to gain emotional attachment to the offer. Once you allow emotions into the decisions that require money you have opened the door for the greed button to be pressed. Manipulative sales techniques will always seek to press your greed button (and please don't think you are above becoming greedy). Ponzi schemes have only been successful due to the personal greed which exists in all of human nature. So, lets look at the top 10 Investing scams out there today (please beware as the number and levels of scams will exponentially grow in todays present market grief).

“Ponzi scammers top the list of scam artists taking return-hungry investors to the cleaners, according to the latest look at the investment industry by the North American Securities Administrators Association. A close second is investment fraudsters targeting seniors.
‘These schemes offer products and pitches that may sound tempting to many seniors who've seen their retirement accounts and income dwindle in recent years,’ says Ralph A. Lambiase, NASAA president and director of the Connecticut Division of Securities. ‘It pays to remember that if an investment opportunity sounds too good to be true, it usually is.’”

Top 10 Investing Scams
A promise of 40% returns?
The quest for a safe investment vehicle is the common theme in all the scams. Here are the top 10, ranked roughly in order of prevalence or seriousness:

1. *Ponzi schemes. This is an old scam named for Charles Ponzi, a swindler from the early 1900s who conned $10 million from investors by promising 40% returns. His scam has been copied by countless crooks. The formula is simple: Promise high returns to investors and use their money to pay previous investors. According to the NASAA, Ponzi scammers often blame government intervention for the failure of their system. In Mississippi, two Ponzi scammers pled guilty to a scheme that bilked 41 investors from four states out of $10.2 million. They told investors they were taking part in a money-trading program. The program never existed.

2. *Senior investment fraud. Record-low investment rates, rising health care costs and an increased life expectancy have set seniors up as targets for con artists peddling investment fraud -- like Ponzi scams, unregistered securities, promissory notes, charitable gift annuities and viatical settlements. In 2003, Pennsylvania securities regulators shut down a Ponzi scheme that bilked $2 million from seniors' pensions and IRAs.

3. *Promissory notes. These are short-term debt instruments often sold by independent insurance agents and issued by little-known or nonexistent companies. They typically promise high returns, upward of 15% monthly, with little or no risk.

Bad brokers and not-really-brokers

4. Unscrupulous stockbrokers. As share prices tumble, some brokers cut corners or resort to outright fraud, say state securities regulators. And investors who have grown more cautious and scrutinized their brokerage statements have discovered their financial adviser has been bilking them via unexplained fees, unauthorized trades or other irregularities.

5. Affinity fraud. Taking advantage of the tendency of people to trust others with whom they share similarities, scammers use their victim's religious or ethnic identity to gain their trust and then steal their life savings. The techniques range from "gifting" programs at churches to foreign exchange scams.

Please return this week for the rest of this list.

*You may recognize many of these scams as daily events promulgated by our banking system. Of course those scams are legal and should not be confused with these investing scams.