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Top 10 Investing Scams

Someone's always ready to empty the pockets of the investor who's overly eager for outsized returns. Here

are some of the most prevalent schemes as published by

“Ponzi scammers top the list of scam artists taking return-hungry investors to the cleaners, according to the

latest look at the investment industry by the North American Securities Administrators Association. A close

second is investment fraudsters targeting seniors.

‘These schemes offer products and pitches that may sound tempting to many seniors who've seen their

retirement accounts and income dwindle in recent years,’ says Ralph A. Lambiase, NASAA president and

director of the Connecticut Division of Securities. ‘It pays to remember that if an investment opportunity

sounds too good to be true, it usually is.’”

Top 10 Investing Scams

A promise of 40% returns?

The quest for a safe investment vehicle is the common theme in all the scams. Here are the top 10, ranked

roughly in order of prevalence or seriousness:

1. Ponzi schemes.

This is an old scam named for Charles Ponzi, a swindler from the early 1900s who conned

$10 million from investors by promising 40% returns. His scam has been copied by countless crooks. The formula

is simple: Promise high returns to investors and use their money to pay previous investors.

According to the NASAA, Ponzi scammers often blame government intervention for the failure of their system. In

Mississippi, two Ponzi scammers pled guilty to a scheme that bilked 41 investors from four states out of $10.2

million. They told investors they were taking part in a money-trading program. The program never existed.

2. Senior investment fraud.

Record-low investment rates, rising health care costs and an increased life

expectancy have set seniors up as targets for con artists peddling investment fraud -- like Ponzi scams,

unregistered securities, promissory notes, charitable gift annuities and viatical settlements. In 2003, Pennsylvania

securities regulators shut down a Ponzi scheme that bilked $2 million from seniors' pensions and IRAs.

3. Promissory notes.

These are short-term debt instruments often sold by independent insurance agents and

issued by little-known or nonexistent companies. They typically promise high returns, upward of 15% monthly,

with little or no risk.

Report provided by Gradient Financial Group, LLC


Bad brokers and not-really-brokers

4. Unscrupulous stockbrokers.

As share prices tumble, some brokers cut corners or resort to outright fraud,

say state securities regulators. And investors who have grown more cautious and scrutinized their brokerage

statements have discovered their financial adviser has been bilking them via unexplained fees, unauthorized trades

or other irregularities.

5. Affinity fraud.

Taking advantage of the tendency of people to trust others with whom they share similarities,

scammers use their victim's religious or ethnic identity to gain their trust and then steal their life savings. The

techniques range from "gifting" programs at churches to foreign exchange scams.

6. Unlicensed individuals, such as independent insurance agents, selling securities.

From Washington state to Florida, scam artists use high commissions to entice independent insurance agents into selling

investments they may know little about. The person running the scam instructs the unlicensed sales force to

promise high returns with little or no risk. This scam has made the top 10 list three years running. Investors

approached by an independent agent should first call the state's securities regulator and ask if the salesperson is

licensed. Then ask whether the investment being offered is registered as well. If the answers are yes, the

investors should be more comfortable about the product. But investors should review the product with the same

healthy skepticism that they would any investment opportunity.

Conspiracies behind every tree

7. "Prime bank" schemes.

 Con artists promise investors triple-digit returns through access to the investment

portfolios of the world's elite banks. Purveyors of these schemes often target conspiracy theorists, promising

access to the "secret" investments used by the Rothschilds or Saudi royalty. In an effort to warn investors, the

Federal Reserve pointed out that these don't exist. But unfortunately, that government denouncement just feeds

into the conspiracy mindset linked to this scam.

8. Internet fraud.

According to NASAA, Internet fraud has become a booming business. For example, federal,

state, local and foreign law-enforcement officials targeted Internet fraudsters during Operation Cyber Sweep in

November 2003 -- and identified more than 125,000 victims with estimated losses of more than $100 million.

"The Internet has made it simple for a con artist to reach millions of potential victims at minimal cost," says

Lambiase. "Many of the online scams regulators see today are merely new versions of schemes that have been

fleecing off-line investors for years." Lambiase warns consumers to avoid the infamous Nigerian 419 scam, saying

Report provided by Gradient Financial Group, LLC


Internet users should ignore e-mails from individuals in need of help who want to deposit money in overseas bank

accounts. "Don't be dot-conned," he says. "If you get an e-mail pitching a deal that can't be beat, hit delete."

Funds and Variable Annuities

9. Mutual fund business practices.

Recent mutual fund scandals have made the national news and attracted

the attention of investors and launched several investigations. "These investigations demonstrate a fundamental

unfairness and a betrayal of trust that hurts Main Street investors while creating special opportunities for certain

privileged mutual fund shareholders and insiders," says Lambiase. "We will continue to actively pursue inquiries

into mutual fund improprieties," he says.

10. Variable annuities.

As sales of variable annuities have risen, so have complaints from investors -- most

notably, the omission of disclosure about costly surrender charges and steep sales commissions. According to the

NASAA, variable annuities are often pitched to seniors through investment seminars -- but regulators say these

products are unsuitable for many retirees. Lambiase says variable annuities make sense only for consumers who

can afford to have their investment locked up for 10 years or longer. "Our fight against fraud never stops because

each year con artists discover new ways to fleece the public," says Lambiase. "Sadly, many of the age-old scams

still work to cheat victims of their hard-earned savings as well."


Worried - Concerned - thinking of putting what little money you have left in your sock!

Stop in and talk to us - we have SAFE - SOUND -SECURE insurance products to safeguard your money.

114Court St. Pomeroy, Ohio 45769     740-992-6677    

Posted 8:11 AM

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