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With Investment Scams, Your Eyes Will Deceive You

I recently did a QualifEye™ analysis for a church in Arizona.  They’d been pitched an opportunity to make an outrageous return on an investment of $500,000 in only 90 days through a vaguely described scheme involving treasury repos.  My report revealed that the broker pitching the opportunity was operating under an alias, had two prior bankruptcies [...]

I recently did a QualifEye™ analysis for a church in Arizona.  They’d been pitched an opportunity to make an outrageous return on an investment of $500,000 in only 90 days through a vaguely described scheme involving treasury repos.  My report revealed that the broker pitching the opportunity was operating under an alias, had two prior bankruptcies and several outstanding civil judgments against him.  We gave the investment our lowest Safety Rating, a 40.

But scamsters are a tenacious bunch.  When the church showed them our report, the scamsters offered to wire $25 million into the church’s building fund as a gesture of good faith (alas, a wiring snafu kept the money from ever landing in the church’s account).  If they had wired anything at all it would have been something in the neighborhood of $25,000 (stolen from another investor) with assurances that the remainder was on the way and a request that the church finalize the deal in the meantime. 

This is right out of Scams 101.  They expect an initial rejection and are anxious to ‘prove’ themselves.  Oftentimes this comes in the form of a ‘test’ of the ‘program’ that supposedly generates the promised returns.  They’ll gladly accept a smaller amount of money, and dutifully pay you the promised returns, right on schedule, because they know that once you’ve actually ’seen it work,’ any further sales resistance vanishes, and you will part with every dollar you can lay your hands on.

If you’ve seen people falling for Three-card Monte on the sidewalk or on the bus, you’ve seen first hand just how persuasive the illusion of success can be.  There is always a shill in the crowd pretending to be seeing the game for the first time.  He gives it a try, and he wins, thereby convincing the marks that the game is legitimate.  Several people leave with only a fraction of the money they had in their pocket when the game began, never comprehending why they didn’t win when ‘that other guy’ did.

Whether it’s a shill or a ‘test’ of the program that the scamster promises will deliver riches, the promoter is happy to part (or seem to part) with a small amount of money to make the bigger score.  Remember, though, that while you may receive a ‘return’ on the investment in the beginning, it is money stolen from a later mark.  It is not unheard of for the SEC to sue for return of that money.  In the end, you will be poorer and will have helped fuel a scheme that costs other people their life savings. 

Before investing in any unregistered investment, put a pair of SEC-trained eyes on it.

 

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