Investment Fraud: Different Types Of Fraud

1. Investment Fraud: Different Types Of Fraud Investment fraud typically refers to a wide range of deceptive methods used by scammers to convince investors to take investment decisions. These can include inaccurate or misleading information, or even fictitious opportunities. You may be investing in stocks, bonds or notes, in addition to currency, commodities and real property. There are a variety of investment frauds. Fraudsters have the ability to create new pitches and devise new ways to make money. While the hook could change, most frauds fall under the following categories: Pyramid Schemes Pyramid schemes are scams that claim that they can take a small investment and make huge profits in a very short amount of time. The participants make money by recruiting new members to the program. These fraudsters will often go to great lengths to make these programs look legitimate multi-level marketing schemes. The pyramid schemes will eventually fail when it becomes difficult to find new participants, which can happen rapidly. Sneak a peek at this website to get a useful source about private placement program scam. Ponzi Schemes It is the case when a con artist or "hub" is able to collect the money of new investors and then uses it to make promises of profits to investors who were earlier in the process instead of making investments or managing the funds in the manner the company has promised. Charles Ponzi, a con artist of the 1920s, who persuaded hundreds of investors to invest in complex schemes using postage stamps is the name given to the scheme. Ponzi schemes are similar to pyramid schemes in that they require a steady flow of cash to stay afloat. However, unlike pyramid schemes, investors in a Ponzi scheme usually don't have to solicit new investors in order to receive a portion of "profits." Ponzi schemes could fail if fraudsters operating at the center are unable to attract investors or when too many investors are trying to get their money out for a period of time, like during difficult economic times. Pump-and-Dump In this scam the fraudster purchases shares of low-priced stocks of small, poorly traded businesses and then circulates false information in order to increase stock prices and generate interest. Investors believe they are getting a great deal on a promising stock , and create buying demand at increasing prices. The fraudster then sells his shares at a high price and then disappears with a large number of victims with illegitimate shares of stock. Pump-and-dumps traditionally were executed by cold callers operating from boiler rooms or through the use of faxes or online newsletters. Text messages and emails from spammers are the most well-known vehicles. Advance Fee Fraud The investment scam relies on the investor's hopes that they will be able to correct a previous investment mistake involving buying a low-cost stock. The scam generally begins with an offer

2. to pay an enticingly high price for unredeemable stock. In order to accept the offer you have to pay an upfront fee to secure the service. However, if you do that then you will never see that cash--or even any of the funds that you received from the deal. Offshore Scams The scams originated from another country, and are designed to focus on U.S. investors. There are a variety of offshore frauds, including those mentioned above. Many of these scams involve "Regulation S", a rule that restricts U.S. companies to register securities with the Securities and Exchange Commission. Securities that are sold in the U.S. and sold to foreign investors or "offshore" buyers are not exempt from registration. These types of offers can be used by fraudsters to resell Reg S stock to U.S. buyers , in contravention of the law. No matter what shape an offshore scam takes. U.S. law enforcement agencies may have difficulty investigating fraud and rectifying investor harm when fraudsters operate from outside of the U.S.