A resident of South Florida in the United States has accepted guilt for the offenses of wire fraud, mail fraud, and money laundering charges. He carried out his illicit acts from September 2014 till April 2018, and succeeded in raising over $2.4 million in investor’s funds; he falsely convinced investors of the utility of his internet service and that the idea was being priced at over $1 billion by global technology companies like Google, Amazon and even Apple. He declined to share his past activities where he was permanently banned by the Financial Industry Regulatory Authority (“FINRA”) and the U.S. Commodity Futures Trading Commission (“CFTC”) from certain financial activities. The funds he got from these investments were utilized for his benefit including exotic cars, exotic lifestyle, and expensive diamond rings.
The Department of Justice has grasped and appreciated the need to combat frauds perpetrated against elder citizens making it one of their key priorities by providing the Elder Justice Initiative whose mission is to support and coordinate the effort of the department to combat elder abuse and financial fraud against senior citizens. Senior citizens may make use of the SAFTA (SENIOR ABUSE FINANCIAL TRACKING AND ACCOUNTING TOOL) Toolkit in the event of any suspicion of financial fraud.
Types of Investment Scams
There are various types of investment scams used in defrauding unsuspecting citizens including senior citizens of their hard-earned finances. Some of them include:
- Pyramid Schemes: These are often designed to resemble a multilevel marketing situation, which requires the constant movement of cash to keep going. Funds from new investors are used to pay older investors. The scheme dies a natural death when there is a paucity of cash inflow.
- Ponzi Schemes: Similar to a pyramid scheme, a Ponzi scheme utilizes the funds from new investors to pay out the old investors and discourage older investors from cashing out their funds to delay the collapse of the scheme
- Lottery Scams: This method is played out when lottery scammers try to obtain the personal information of the investor through fake lotteries or to enter a fake contest. Others convince the investor of their success in a contest and would require the investor to make a “small payment” before gaining access to the prize.
- Telephone Scams: Scammers using this method also try to obtain the personal information of unsuspecting individuals through real calls, robocalls, and SMS. They may also make use of false promises and lottery scams to lure investors.
- Banking Scam: Perpetrators of this scam utilize all means to access an individual’s account including the following methods:
- Overpayment Scams: The scammers try to use counterfeit checks to obtain money from unsuspecting individuals.
- Unsolicited Check Fraud: Here, a scammer delivers an unrequested check to the individual and when they go to cash it, they find out that there is more involved than just cashing a check.
- Automatic Withdrawals: Withdrawals from the victim’s accounts are automatically made by the scammers enabling the victim to qualify for a free trial or claim a prize
- Phishing: this may come in the form of an email or a text, requesting the individual to make some verifications on their account details, debit, or credit card.
- Government grant scams: These grants are not usually awarded to individuals, however, scammers may take advantage of the ignorance of this fact and entice individuals by promising them a grant and thereafter asking them for their banking information. They use this information to access the accounts of the victims and perpetuate their nefarious activities.
- Charity Scams: During times of tragedies and natural disasters, some scammers may set up a fake organization and solicit support thereby taking advantage of the benevolence of individuals
- Ticket Scams: In this case, the scammers make use of ticketing to obtain the victim’s funds; they may either sell a bogus ticket or won’t provide the tickets after receiving payment. They may also obtain the credit card information of victims through these false ticket sales.
How to Avoid Investment Scams
The United States Securities and Exchange Commission has provided some ways to avoid investment scams especially Ponzi schemes, fake cd scams, and community-based financial scams:
PONZI SCAMS are characterized by;
- Guaranteed High Return on Investment: High returns with little or no risk is a telltale sign of a Ponzi scheme because every investment comes with its attendant risk and the higher the risk, the more real the investment is.
- Unlicensed and Unregistered Sellers: Persons who promote this kind of scam are usually unregistered and unlicensed, it would do the potential victim a lot of good to carry out due diligence and verify the status of the seller before proceeding with the investment. The individual can make their verification using the search resources available on the investor website.
- Overly consistent returns: The financial market is such that it fluctuates all the time and it is an evident scam when the returns of an investment have a consistent value.
Other Scams may be characterized by:
- The high-interest rate with no sanction for premature withdrawal
- Investors are asked to make deposits to an account with a name different from the organization’s name.
A potential investor may unveil a scammer by carrying out the following:
- Verifying credentials with the FINRA, the SEC, or the local securities regulators. Investors may utilize the search tool FINRA Broker Check to make some of their verification.
- Investors are advised to be wary of investments promotions with a high-interest rate
- Do not engage in any investment because there is a notion that everyone is in on it.
- Investors are advised against rushing to make any investment. Due diligence must be carried out before any investment is made.
- Some scammers make use of freebies to persuade an investor and make them feel obligated. Investors should never feel indebted or obligated to invest because of the freebies attached to it.
- Individuals are advised to not deposit any check or money order from entities that are not familiar
- Do not give out banking details to anyone who requests it.
- Contact the appropriate authorities to report cases or suspicions of fraud.