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‘Guaranteed?’

A federal grand jury in California has indicted mortgage lender Cheryl Camus of running a Ponzi scheme.  Citing to a release issued by the U.S. Attorney’s office, Robert Salonga of the Contra Costa Times reports:
Camus lied to her clients about her investment experience, what investors’ money would be used for, and rates of return and falsely [...]

A federal grand jury in California has indicted mortgage lender Cheryl Camus of running a Ponzi scheme.  Citing to a release issued by the U.S. Attorney’s office, Robert Salonga of the Contra Costa Times reports:

Camus lied to her clients about her investment experience, what investors’ money would be used for, and rates of return and falsely promised that she could personally guarantee their investments, which would be secured by a legitimate deed of trust, the release said.

Notice the promise of the personal ‘guarantee.’  We see guarantees so often in Ponzi schemes that they have become a reliable indicator of whether an investment opportunity is a scam.  

“But why would anyone agree to personally guarantee an investment if he was not certain that it was legitimate and would pay the promised return?” you might ask.  “The liability would be enormous if the investment does not perform.’ 

The answer is that by running a Ponzi scheme the person selling the investment has long ago crossed the Rubicon.  When caught, he is going to prison.  How worried do you think he is going to be about you suing him when he defaults on the guarantee?    He’ll be able to wallpaper his cell with all of the civil complaints against him.  But, he’ll have bigger things - and bigger people - to worry about in prison. 

When you see the word “guarantee” in an offering document or sales literature, therefore, be suspicious.  Does the investment make sense without the guarantee?  If not, stay away.  Even if it seems to make sense without the guarantee, though, your best protection is a thorough review by an SEC-trained investigator.  Proceeding without such a review is almost ‘guaranteed’ to end in disaster.    

 

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