Can you guess how much McDonald’s is worth? $148.8 billion.
While you try to wrap your head around that number, consider this: investment scams make one-third of that every year.
Whether you have $50B to protect in the bank or not is irrelevant. The truth of the matter is investment scams hurt everyone.
So long as they’re around and triumphing over honest investors like you, we can’t rest.
Let me show you the 8 most common investment schemes so we can put the scam artists that orchestrate them out of business for good.
1. Advance fee scheme
If you’ve been burned by investments before, the advance fee scammers will target you specifically.
They come into your life promising redemption from your past failure, and they’ll even buy or exchange the mishap in a way that makes you money.
This all comes after a “refundable” fee, deposit, or tax. Should they come calling later for more money, that’s the last you’ll see of that too.
The key to avoiding these types of schemes is to be aware of where it’s coming from (i.e. email, mail, advertising, etc.) and to verify the source.
For example, you wouldn’t return a faulty item from a store to a third party, offering to buy it from you for more than you paid.
That person probably has something up their sleeve, and the same goes for these perpetrators.
2. Boiler room scam
In this type of scam, a team of people will set up a makeshift workspace (hence the term “boiler room”), and try to convince you their company is legitimate.
They’ll have a functional website, a toll-free phone number, and a physical address.
Don’t be fooled – the company doesn’t exist.
The solicitation they sent you to purchase a product or service was just a way to squeeze you for chump change.
To dodge boiler room scams, visit the location of a company that solicits you online for money. Or, search the web for customer reviews and hear other people’s experience.
For example, while our primary contact with you for WSI TV is via email or online, our office in sunny Florida very much exists and houses our team hard at work for you every day.
3. Exempt securities scam
Exempt securities scams can be a bit tricky.
They originate when a company wants to sell securities; they’re required to file with regulators.
However, exempt securities do not have to do this. On their own, they’re not scams.
But some scam artists will say fake investments are “exempt securities,” to get you to buy in.
They’ll say the opportunity is only open to the very rich, but they’ve made an exception.
The key to spotting this kind of scam: they’ll likely ask you to sign paperwork that inaccurately reports your income.
If you’re being asked to lie, it’s not a legitimate investment.
4. Forex scam
Forex stands for foreign exchange, as in the biggest market in the world.
Forex traders buy and sell currencies to make money based on changing exchange rates.
This type of trading can make unreal amounts of money, but for good reason, is very advanced and difficult to do.
Because of this, scam artists can lure in novice investors with promises of massive returns and easy-to-use programs.
They will not let on how difficult and risky the trading actually is, and the service or product they sell you may lead you to a ton of financial trouble.
These schemes are even illegal in some cases.
Forex trading services are often operated remotely from another country. That being said, the regulators we know and love don’t have jurisdiction over how your money is spent.
The biggest red flag to protect you from forex scams are if you’re asked to wire money to an offshore account. You will likely never see your money again.
5. Offshore investing scam
Speaking of offshore accounts, offshore investing scammers promise to send your money abroad to grow unhindered by oppressive taxation at home.
Just as a rule of thumb, you should be wary of schemes to avoid taxes.
It’s a risky business, and you could end up owing the government even more money when everything is said and done.
6. Pension scam
As if getting to retirement isn’t difficult enough, scams await the path to your golden years as well.
A pension scam would target your retirement savings in a Locked-In Retirement Account (LIRA).
This type of account blocks you from withdrawing money until a certain age, with limits on withdrawals and taxes to pay.
The scam comes into play in promotions or ads offering a special loan to tap into the secured funds or avoid taxes.
Here’s the catch – to get this loan, you have to sell the investments in your account and buy whatever startup the scammer is selling.
They promise to return 60-70% of your capital. The rest is treated like a fee.
The end result? The promised cash turns to dust and your retirement savings suffer.
7. Ponzi or pyramid scheme
If you know the name “Bernie Madoff,” then you know something about our next scam.
Ponzi schemes are the stuff of dramatized stories, like The Wolf of Wall Street and The Wizard of Lies.
But what are they exactly?
These schemes recruit people with promises that are, for lack of a better phrase, too good to be true.
One of the most popular leads is to join a group of investors in putting money into an opportunity promising to make you rich. You might even know the person who invited you.
But getting in early just adds to the ruse: they’ll send modest checks you might think are interest. This is just bait, to get you to invest more, or worse, bring family and friends into the “deal.”
That’s when the rug gets pulled out from underneath you: the investment doesn’t exist.
The money you’ve been receiving has been from other investors like you, and the whole thing collapses.
In worst case scenarios, the orchestrators vanish, with all the money.
In one of the biggest Ponzi schemes ever, the billionaire financier who’s been playing this game for decades goes to federal prison.
8. Pump and dump scam
Last but not least, pump and dump scams go through a list of potential “investors” to showcase a great deal on a stock.
The person contacting you about this deal often owns a massive position in the security, and it may not be legitimate.
The more investors they get to buy the shares, the higher the stock value goes.
At the top of the peak, the scammer sells off and runs for the hills.
Your position is now worth next to nothing, following the sell-off.
When it comes to avoid scams like these, or any investment scams for that matter, always keep your wits about you.
If something doesn’t seem right, don’t put your money on the line.
Scammers have drummed up a $50B business without your help, let’s not contribute anymore to their schemes.
