In a private placement program scam, you are typically required to provide funds for an investment that is questionable or one that may not exist at all. Most cases will cause you to lose some or all your money. Here are some typical scams.

8 Typical investment scams

Scheme with advance payment

In an advance fee scam, the victim is persuaded to make a payment upfront in order to benefit from the promise of significantly more in return. The issue is that the fraudster will then take the money and the victim won't hear from them again.

Scammers typically are targeting investors who have lost money on a risky investment. They'll reach out to the investor offering to assist them in recovering the losses. They may say they will purchase or sell the investment for a significant profit to the investor, but the investor must pay an "refundable" fee in the form of a deposit or tax. Investors who send more money will lose it, too.

Boiler room scam

A common method of committing to a private placement program scam and to create an office. They could also refer you to their website as a way to convince you that their company is legitimate. They may also create an online number toll-free and an official address that makes the company appear legitimate.

The company does not exist. The website contains fake information and the office is a temporary or post office box. The scammer will close down the office before you can realize that you have lost your money, and then move onto the next scam.

Scammer with exempted securities

Prospectus forms must be submitted to securities regulators when a business wants to offer securities. Exempt securities are a different case. They may be sold without a prospectus, but are restricted to accredited investors and subject to other conditions.

As a whole, exempt securities aren't scams. Scammers might attempt to convince that exempt securities are frauds. Emails or calls that do not come from a hot tip about a business that is "going public" should be suspicious. The investment is restricted to wealthy individuals, but you may be offered an exception. There is a chance that you will be required to sign a form that inaccurately reflect your income and net worth. If you're required to lie about how much money you have it is a sign of one who has violated the rules.

Forex scam

Foreign exchange (forex market) is the biggest and most liquid financial market. Investors trade currencies to make money on fluctuations in the exchange rate. But trading in foreign currencies can be very risky. The advertisements for Forex promote an easy access to the foreign exchange market, often through courses or programs. Forex trading is controlled, however, by international banks with large scales that have access to cutting-edge technology, highly trained staff and huge trading accounts. They are extremely difficult to beat. Forex trading is extremely risky.

Certain strategies for trading in forex could also be illegal or fraudulent. Forex trading services can be operated online from other countries, so unregulated companies are not following the law. You may not have your money invested according to the terms of the agreement. In this case you could be required to pay for funds to be wired to an offshore account. The funds then be unavailable. You may lose all or part of your money under any of these scenarios.

Offshore investing fraud

If you transfer your money offshore to another country This scam promises huge profits. Most of the time, the goal is to avoid or lower your taxes. Be skeptical of tax avoidance schemes as you may end with the government owing you money in tax restitution, interest and penalties.

The offshore investment comes with additional risk factors. If you move your money to another country and it is wrong, you may not necessarily be able to take your matter to a civil court in Canada. It might be impossible to get the money back.

Pension scam

This scam targets people who have retirement savings in the form of a Locked-In Retirement Account (LIRA). The majority of cases do not allow you to withdraw funds from an LIRA until you're 55 years old or more. There are generally limits on how much money you can take out each year, and it's likely that you'll have to pay tax on the cash you take out.

The investment frauds is usually advertised in ads as a special "RRSP loan" which allows you to bypass tax laws and tap into your locked-in funds. You'll need to sell the investments you have in your LIRA in order to qualify for the loan. Then, you can use the money to purchase shares of the start-up business which the promoter plans to sell. The promoter will give you 60% to 70% of what you've invested. The rest will be kept by the promoter as fee.

Investors who begin investing early in the scheme may see high returns from what they consider interest-paying cheques. Investors are usually so pleased that they choose to invest further or find new investors through their acquaintances.

The investment isn't real. The "interest cheques" are paid with investor's own funds and money from new investors. Eventually, new people cease joining the scheme. There's nothing left to give out and you're not able to collect a cent. This is when the promoters vanish, taking all the money they've earned with them.

Pump and dump scam

These scammers use lists of potential investors to sell you a good deal on low-priced stocks. The company or person who called you may be a shareholder. The stock may not be authentic. As investors purchase shares, the value of the stock goes up dramatically. The scammer will sell their shares when the stock is at its highest and the value decreases. It's then left with a stock worthless.

Posted by: Andrew Tyler at 10:24 AM | No Comments | Add Comment
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