Everything old is new again. Even in the new year,
scammers will use tried and true scams continue to attract investors.
Here's a summary of some top investor threats - everything from
outright fraud to legitimate but risky investments.
Gold. Schemers promise "guaranteed" returns with
a stake in an active or soon-to-active gold mine that will bring quick riches.
In reality, gold investments can be highly speculative and risky. More than
150 people, most of them Oregonians, lost $2.6 million in a 2013 gold-mining
scheme that involved unlicensed sellers promoting unregistered securities.
LaVonne Treat was one who invested in the gold mine.
See her story.
Oil and gas. The schemer may offer investments
in oil or gas wells in Texas or Oklahoma and tout their productivity. While
appealing to those frustrated with the stock market or skeptical of Wall
Street, these tend to be risky and unsuitable for smaller investors who
cannot afford the risk. In early 2013, Oregon regulators ordered
a Louisiana man to refund $25,000 to an Oregon couple that invested in an
oil and gas venture in Texas.
Promissory notes. Often pitched as personal loans
with the promise of big returns, buyers may suffer deep losses if the notes
are unregistered or fraudulent. Unregistered promissory notes are often
covers for Ponzi schemes.
Ponzi schemes. This is the art of deftly moving
money from one investor to another so it appears to make money. In reality,
the Ponzi pays early investors with funds from later investors. All end
up losing all or most of their money. Ponzi operators and other fraudsters
often target members of religious, ethnic or other groups with common interests.
Members of the group find it hard to believe that "one of their own" could
scam them. See how a Ponzi
New technology. Schemers are good at touting the
newest technology all they need are a couple of cutting edge
investors to get off the ground. The schemers may use a prototype called
a "black box" to convince you to invest. Watch Avoiding
Technology Scams on YouTube.
Real estate investment schemes:
Real estate investments are the second-most common product leading to securities
fraud investigations, according to the North American Securities Administrators
Association. While legitimate real estate investments can be an important
part of a diversified investment portfolio, there are big risks with many
types of real estate investments. In particular, state regulators have seen
properties that are bank-owned, pending short-sale,
or in foreclosure
investments supposedly secured by an interest in real
property that actually lack any remaining equity
Scam artists using self-directed IRAs to mask fraud.
Self-directed IRAs allow the owner to invest in whatever he or she wants,
and also shifts the responsibility to research opportunities and avoid scams
to the owner. Custodians and trustees of self-directed IRAs may have a limited
duty to protect the owner and may not evaluate the quality, value or legitimacy
of an investment or its promoters.
Crowdfunding: 2014 promises a flurry of Internet
investment pitches as the Securities and Exchange Commission writes rules
to make it easier for small companies to raise capital online versus going
through the stock market. Websites called "funding portals" will connect
investors who meet certain standards with businesses that can raise up to
$1 million every 12 months. There are caps on how much investors can invest,
based on net worth, but both small businesses and investors could lose if
they are not careful. Just a few of the concerns:
Are the funding portals legitimate? Small businesses,
as well as investors, should verify the legitimacy of a portal before
using its services.
A high percentage of small businesses fail. Are you
prepared to lose the use of your money for a long time? Forever?
Limited regulatory oversight means that, more than
ever, investors must research the people and the investment opportunities
to separate scams from legitimate offers and to assess risk.
Internet offerings: Be wary of investment opportunities
you learn about through the Internet. When you see an offering- whether
it is on a funding portal, in an online newsletter, on a message board or
in a chat room -do your homework to avoid scams.
The North American Securities Administrators
Association and Oregon securities regulators compiled this list.
Need a speaker? Diane Childs, outreach coordinator, provides free presentations
on preventing financial fraud for associations, service groups, chambers of
commerce and others. Contact her at firstname.lastname@example.org
or phone her directly at 503-947-7423 or (toll-free) 1-866-814-9710.