Ponzi Schemes

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Ponzi fraud involves using money from new investors to pay early investors. This creates the false sense that everyone is profiting. That it's one big party! That is until the scheme collapses. All it takes is one default or a shutdown investigation!

This scam was present well before the 1920s.Then it took it's name from a con man named Charles Ponzi. Those were the days of P T Barnhams' "There's a sucker born every minute"!

In a time of market uncertainty and government bankruptcy a "don't miss out" mindset creates many potential victims. Capturing targets used to be by using mail and phone. Now social media is a hotbed for investment fraud according to Lori Schock, director of the Securities and Exchange Commissions' Office of Investor Education and Advocacy.

Here are tips to help protect yourself;

  • Do your homework. Only 20% of investors do a background on investors or products before buying
  • Look at the investor or sponsoring firm. The SEC's REDGAR data base gives free corporate information. Your local courthouse can cue you in on local area predators
  • Run from red flags. Language like "risk free", "guaranteed returns", and "everybody's on board" should scare you off
  • Be careful even in "safe" places. Churches, country clubs and community organizations are targeted areas for those pitching Ponzi Schemes. Rely on research over referrals from friends and relatives
  • Don't be fooled by credentials. Letters after the names of brokers and investment counselors can be meaningless. Some are fakes and some are even gained by paying a fee or taking a short class
  • Don't be starstruck. Celebrity endorsements don't mean an offer is legitimate

For questions or complaints, You can call SEC headquarters, call your local authorities and state attorney general and/or district attorney. In the capacity of a watchful adviser...Michael.

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Recent Comments

30

Yeah, there's no such thing as a guarantee. That eliminates the hard work and effort factor. Great reminder!

have to find the right one Holly!

Rae-1965 I get them so much in the mail thru my email and phone calls I just politely pay them no mind. And put them in the trash. Lol

Good Idea. Keep it up!

Great reminder post ... if something sounds too good to be true it isually is. If it seems that you are going to be getting something for nothing, nothing is usually what you will get. Getting rich almost never ever happens quickly.

Michael,

Thanks for taking the time to write your post.

My rule of thumb is to know what product or service the company is selling. I tend to stray away from informational ebooks that are sold at a high price in order to pay an affiliate in the program.

One of the reasons I was attracted to WA is I saw the immediate value of the Open Education Project and the WA community. I could see the service was valuable and could stand alone without the affiliate program associated with it.

All the Best,

Louisa

Thanks for sharing, Mike.

Thank you Michael. I seem to be a magnet for these, I'm learning to spot them now. I just got a call a few days ago telling me I'd been awarded a $14,00.00 grant because I have paid my taxes over the past year and have no criminal history. It was supposedly being offered by the NIH, National Institute of Health. I called them, they told me it is a scam and to stay away. So glad I did my homework.

Thanks again Michael.
Rae Anne

Great practice. My pleasure Rae Anne

Thank you for the info.. I had heard of "Ponzi" but didn't know what it was, so thank you.

Michele

My pleasure Michele!

Great advice. My wife was scammed once. Had to make a bank loan to get straightened back out. I totally agree. Do your homework. If it sounds to good to be true it probably is. Michael Cox.

Aware of these scams Michael, but think that you have done the right thing is posting to make others aware.

wise advice

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