Top 10 Investment Scams

When compiling the top 10 investment scams, there is an interesting mix that sometimes contains a hybrid of several scams, or is a mix and match of existing scams to create a new scam.

They come in all shapes and sizes, with some easy to detect, and other very hard.

Scammers have taken advantage of the recent financial turmoil that has caused a lot of people to look for new ways to invest. Low interest rates and a lack of trust in the stock market has been driving the quest for high return opportunities elsewhere.

The scammers have been quick to meet that demand by devising more creative ways to part you from your hard earned money.

Ponzi scams top the list according to the latest look at the investment industry by the North American Securities Administrators Association.

List of Top 10 Investment Scams

1. Ponzi Schemes

This is a very old scam and involves promising a high return to investors and using the money of new investors to pay previous investors. The scheme collapses when money owed to previous investors is greater than the money that can be raised from new investors. Because a Ponzi scheme is technically insolvent, in the sense that its liabilities exceed its assets from the first day it does business, it can only continue until the pool of gullible new investors dries up

2. Senior Investment Fraud

With rising health costs, record low interest rates, and an increased life expectancy, seniors have become a target for scammers pushing  investment fraud such as Ponzi schemes, unregistered securities, promissory notes, and charitable gift annuities

3. Unscrupulous Stockbrokers

As share prices tumble, according to state securities regulators, some brokers cut corners or resort to outright fraud. Some investors who have become more cautious and scrutinized their brokerage statements have discovered their financial adviser has been defrauding them using unexplained fees, unauthorized trades or other irregularities

4. Promissory Note Scams

A promissory note is a written agreement to pay back a loan with a certain amount of interest. Scammers offer an opportunity to invest in high-yield promissory notes, which work much like bonds. But the scammer never actually loans money to a third party. They simply take the investor's money. They typically offer high returns such as 15% monthly, with little or no risk

5. Real Estate Investment Schemes

State securities regulators have noted a marked rise in scams disguised as offers to help homeowners caught facing foreclosure to 'save' their homes or 'fix' their mortgages. It is usually done in exchange for a fee paid in advance. Most of these advance-fee offers only generate a quick profit for the scammer and provide little or no benefit to the consumer

6. Prime Bank

The term often is referred to as the worlds top 50 banks. Prime banks trade low risk, high quality, instruments such as Federal Reserve notes and International Monetary Fund bonds. Scammers promise investors triple-digit returns through access to the investment portfolios of the world's prime banks. They sometimes promise access to the 'secret' investments used by the Rothschilds or Saudi royalty

7. Pump and Dump

A small group of informed people buy a stock before they recommend it to thousands of investors. The result is a quick spike in stock price followed by an equally fast downfall. The people who owned the stock early quickly sell off their stock when the price peaks and make a huge profit. Most pump and dump schemes recommend companies that are over-the-counter bulletin board (OTCBB) and have a small float. There is also a variation of this scam called the 'short and distort.' Instead of spreading positive news, scammers use a smear campaign and attempt to drive the stock price down. Profit is then made by short selling

8. Life Settlements

State securities regulators have been concerned about life settlements, commonly known as 'viaticals', and the rising popularity of these products among investors. While life settlement transactions have helped some people obtain funds needed for medical expenses and other purposes, those benefits may come at a high price for investors, particularly senior citizens. Wide-ranging fraudulent practices in the life settlement market include Ponzi schemes, fraudulent life expectancy evaluations, inadequate premium reserves that increase investor costs, and false promises of large profits with minimal risk

9. Commodity Scams

These schemes include investments in gold, silver, rare coins and gems. Scammers have recently capitalized on the political circumstances that have driven up the cost of oil and natural gas. The same circumstances make investments in alternative energy sound quite attractive, however, just because it sounds good for the environment doesn't mean it can't be a scam

10. Natural Resource Investments

There is a continuing rise in energy and precious metals scams promising quick, high returns. Investors anxious to recover losses quickly will likely be hooked by fraudulent oil and gas 'investments as well as fraudulent offerings of investments tied to natural gas, wind and solar energy, and the development of new energy-efficient technologies



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