Saturday, Sep 17, 2011
Gulf News
Fraud artists are everywhere, offering all sorts of schemes that promise to make your life better.
One of the oldest scams in investment history is the Ponzi or pyramid scheme in which a swindler convinces a number of individuals to invest their money in the company. The founder later expands his network and uses the money he collects from the new recruits to pay huge rewards to the previous group.
As more members join, the founder continues to collect more money. Then one day the company shuts down and those at the bottom of the scheme are left wondering how to get their hard-earned cash back.
Here are other financial scams you should be wary about:
Pre-IPO shares
Someone tells you of an amazing opportunity to buy a particular stock before an initial public offering (IPO) or before the company makes a big announcement that will dramatically increase the price of the shares. There’s a great chance you’re being offered to buy a bogus stock.
“The reality is of course that the shares either don’t exist, or if they do, they have no such good news and the shares are worthless,” says James Thomas, regional director of Acuma Wealth Management.
The US Securities and Exchange Commission recently issued a warning about investment scams that offer investors the opportunity to buy pre-IPO shares of popular companies. A con artist reportedly misappropriated more than $3.7 million from investors by offering fake shares of companies including Facebook, Google and AOL/Time Warner.
Prize and sweepstake draws
You get an unexpected call or e-mail telling you have won a prize. To collect the prize, you will be asked to pay administration fees, taxes and other charges.
Once you send your payment, Steve Gregory of Holborn Assets says, don’t expect anything to come in return.
“Help me”
An e-mail from someone you know reaches your inbox, claiming he is stranded somewhere overseas and badly needs money. He’s not your friend, but a stranger who managed to hack into the e-mail system and is waiting for you to send money.
Forex trading
There are many legitimate foreign exchange trading firms with proper licences, but be wary of those who seek victims on the internet and promise free money to get you started.
“Be wary of these, and the fact that every trade makes fees for the traders, and engages high risk for the client,” notes Gregory.
Time share
You may be offered a free holiday or some other incentive to appear at a seminar.
You will then find yourself under pressure to pay a huge deposit on something you never previously considered.
You don’t have time to think about the offer and you are extremely pressured by an aggressive salesman into using your credit card with promises of a satisfaction guarantee. “The only guarantee is that the salesman feels satisfaction as he spends your money,” says Gregory.
Voodoo/psychic
There are people out there who claim they have special powers to bring good luck, foresee the future, heal diseases or make you rich. While some of them may be legitimate, there are “clairvoyants” who have actually built a fortune.
Just this month, a family who made a business out of fortune telling in Florida was charged with allegedly amassing $40 million from a psychic scam. “It’s astonishing how people will part with money to gain control over someone or something with the help of the spirits, as directed by seemingly clever people who claim to know how to help you get rich, win over someone you love, change something unpleasant in your life, or make you successful,” said Gregory.
safe practices
It’s astonishing how people will part with money to gain control over someone or something with the help of the spirits, as directed by clever people who claim to know how to help you get rich.”
Steve Gregory
Holborn Assets
By Cleofe Maceda?Senior Reporter
Gulf News 2011. All rights reserved.
