Investment Scams, Part Two
Tuesday, September 30th, 2008
As we mentioned last time, we’re going to talk about the various kinds of scams that you might run into the world of investing; scams designed to separate you from your hard earned cash with false promises. The internet has given the people who perpetrate these scams a new lease on life by providing them with the anonymity needed to operate in secret and the technological means to target a much wider number of people than ever before.
However, just because the technology has advanced, the basic scams themselves are still fairly old. That’s the one thing that we have going for us when it comes to spotting investment scams: there are really only a few basic types of scam out there, and they just tend to get repeated over and over. Here are the most frequently seen:
The Pyramid Scheme
This is a scheme wherein money is solicited from investors in order to pay off previous investors who are now expecting to receive a return. Of course, such a scheme will eventually implode when the money coming in from new investors is insufficient to cover what is owed to the old investors.
Pump and Dump
This is a practical wherein a group of people purchase a stock, almost at random. They buy a large number of shares, and then they go about recommending that stock to as many as they can, usually thousands of other investors. When those people buy the stock, there is a sudden spike in the value of the stock. The duped investors will lose when the spike is followed by the inevitable fall, but those in the know will sell their holdings during the high point of the stock, thus making off with lots of profit.
In general, one should also beware of trades that take place in off shore accounts, because this is usually done to avoid operating in the jurisdiction of local law enforcement. They almost always are looking to hide something.
Next time, we’ll begin to take a look at some of the schemes in greater detail, beginning with the bulletin board scheme.
See you next week for part 3 of Investment Scams.
Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008







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