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Protect Yourself From These Classic Investment Scams

In the current financial crisis, fraud in the stock market is alive and well. Many of these schemes take advantage of the fears of citizens, and the growing trend towards these schemes goes against the current financial upheavals that are consuming the United States. Below is a list of the best-known investment scammers and tips on how to protect yourself from them.

Ponzi Scam davenport laroche

During the Great Depression, Charles Ponzi promised to double the money of the investors within a period of 90 days. He collected money from investors and paid the income of new investors who were in the scam. In the end, the last investors who fell were left with nothing when Ponzi left with his money. The failure of this scam also occurs when business owners sell more than 100% of the business to investors in small quantities. It was the plot of Broadway’s musical “Producers,” which sold show rights to investors, hoping the show would go to the box office so they could take the money and not pay anything to investors. 

419 Nigerians

Named after a section of the criminal code of a small African country that deals with fraud, online scammers offer investors to cut back the money they are trying to take out of the country for a down payment. A couple of years ago, a US Navy officer used part of his petty cash fund to try to make a profit from this plan, but he burned himself when Nigerian money was never associated with him. Cash Money Life, one of my favorite personal financial blogs, contributed more details about this scam in a recent publication. 

Pumping and unloading

Investors in penny stocks sold on over the counter (OTC) bulletin boards are often victims of this scam. The first investors in a cheap penny that is too small to trade on the New York Stock Exchange are published through unwanted emails and discussion forums on the Internet, which creates an artificial noise around a promotion which prompts novice investors to load. then they decrease their shares of securities listed on the stock market, which causes the new premium to fall for all others. This scam was predominantly featured in The Boiler Room. 

The scheme of the pyramiddavenport laroche

Although this is not necessarily a scheme of actions or a scam, I can not refrain from adding a pyramid scheme to the list here also because of the prevalence in military bases. It seems that the pyramid attracts many military spouses looking for some extra income. The sales forces at the bottom of the pyramid do all the heavy climbing and raise some of their sales to the top members of the pyramid, who have signed the lowest levels. How many military spouses have makeup, plates and bowls of rubber, vitamins or designer baskets hidden in the closet, unsold?

How to protect yourself

All brokers and insurance agents must have a license to sell their products and services. You can verify that the person you do business that has a full license for finra.org and nasaa.org. Only about 10% of all investment fraud and complaints are related to authorized dealers. Therefore, reviewing these sites in advance at davenport laroche review can solve most of your potential problems.


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