Common Investment Frauds

Here is a list of the most common investment frauds and techniques used. What the fraudsters do and how they do it.

Advanced Fee Fraud:

The advance fee fraud is the most common fraud being used today. The fraudster convinces the victim to invest a sum of money with the promise of some sort of future return, often up to 30% return on shares. This return may be in the form of money, product or other benefit. The con artist solicits this money with no intention or ability to deliver the promised return. Investment scams can look and sound believable, with smooth-talking salespeople, slick websites or sophisticated brochures and prospectuses. This can make it hard to tell them apart from genuine investment opportunities. But there are ways to spot and avoid scams. It might be an opportunity to invest in shares, property or rare goods, with the promise that the returns will be high and the risks to your money are low or non-existent. But generally speaking; the bigger the proposed return, the greater the risk. If it sounds too good to be true, IT IS!

Recovery Room Fraud:

This fraud will typically follow an Advance Fee fraud. Let’s for example say you’ve invested money in the first instance and the company you invested with has disappeared, you may email or phone and get no response and this can go on for months. You start to worry and this is where most victims realize they have been defrauded, or at least have a suspicion. Then typically 3-6 months later (sometimes longer) another company will approach you by phone and will tell you some elaborate story about how the first company you invested with went bust or was sold off and your shares can now be recovered. They will often also tell you they can recover the shares and they will be valued higher than your initial purchase. But this comes at a cost — you must pay them up front for the pleasure of recovering your lost commodities or shares.

Of course the story is completely fake and the company calling you will be linked to the first company, often it’s even the same fraudsters contacting you again as part of this recovery scam. They will tease you and tempt you with more stories of higher returns and high stock shares prices and values. But this is where most investors lose the most money and which does the most damage financially and emotionally, because the victim either feels in to deep to stop spending and/or because they are so relieved at getting a sniff at recovering their initial investment back. Its a very powerful fraud strategy.

Reverse Takeover:

This isn’t so much a strategy as a story used to decipher money from you. They can be used as part of an investment scenario to get you to part with your cash based on a fake company being purchased which apparently has shares already on the stock exchange, with the intention of selling these shares to you and generating you high returns.

Other Aggressive Fraud Techniques:

– Fraudsters may tell you your original investment is genuine and demand you do not pull out of the deal. They will reassure you that your original investment is genuine and encourage not to pull out of the deal and may even threaten you with legal action if you stop sending money.
– If you ask for your money back you will be told that you can swap your investment for another deal, with a transfer fee involved or asked to pay a capital gains tax bill before the large profit you were promised can be released to you.