How to Recognize Investment Fraud
According to the FBI, consumers lose approximately $40 billion every year to securities and commodities fraud. Consumers may invest in illegitimate investment schemes because the companies promise them a guaranteed high return on their investment or perhaps the company representative appears trustworthy. Before you put your money into an investment, investigate the company and the investment thoroughly. Learn to recognize the telltale signs of investment fraud in order to protect your finances.
Other People Are Reading
Instructions
-
-
1
Run a search for websites discussing the investment, the company and the people involved. If you can't find anything, this could be a warning sign.
-
2
Watch out for unsolicited investment offers, whether they come from an email, website, fax, letter or even a phone call. Often, con artists will sing the praises of fraudulent investments online and through other media to increase the hype and entice people to buy into them.
-
-
3
Resist potential con artists who urge you to act quickly or the deal will be gone. If the deal is legitimate, there is no reason why you shouldn't be able to invest in it after you've done your research.
-
4
Avoid investments that offer a guaranteed return on your money. A legitimate investment company will discuss the risks with you.
-
5
Ask the investment salesman for a number where you can call him back. If he refuses to give you one, it could be telemarketer investment fraud. Ask him to send you written information about the company and the investment opportunity. Con artists will often refuse to do so, or they might send you a colorful brochure that praises the investment while offering little actual information.
-
6
Avoid dealing with companies who instruct you to send a payment through a private courier or other private delivery service. This a common tactic to avoid detection by the U.S. Postal Service.
-
7
Verify the information the company gives you independently through your own research. If you cannot verify the company's claims, avoid the investment. Another potential sign of investment fraud is the claim that the company has insider information that no one else knows.
-
8
Ask the company representative as many questions about the investment as you can think of. If the investment scheme is fraudulent, answering questions may make the representative nervous. You may also notice that he refuses to answer a question directly, but rather he continues to play up the investment's high return potential.
-
1
Tips & Warnings
Regard offshore investments with suspicion. Not all foreign investments are fraudulent, but if it is illegitimate, it is much more challenging to get your money back when it has left the country.
References
- U.S. Securities and Exchange Commission: How to Avoid Fraud
- Nebraska Department of Banking and Finance: How to Identify Telemarketing Investment Fraud
- Diligentia Group: Do You Recognize These 15 Warning Signs of an Investment Fraud?
- Money Smart: Investment Scams
- FBI: Financial Crimes Report to the Public - Fiscal Year 2006
