to Avoid Losing Your Money to Investment Frauds
Washington, D.C. Every year, Americans lose more than a billion dollars to
investments that turn out to be fraudulent. Companies engaged in fraud often operate a
particular scam for a short time, quickly spend the money they take in, and then close
down before they can be detected. They reopen under another name selling another
Fraudulent investment promoters are glib and resourceful. They may tell you that they
have high-level financial connections; that theyre privy to inside information; that
theyll guarantee the investment; or that theyll buy back the investment after
a certain time. To close the deal, they may serve up phony statistics, misrepresent the
significance of a current event, or stress the unique quality of their offering to deter
you from verifying their story.
The Federal Trade Commission suggests that potential investors can avoid losing their
money if they could only recognize a phony sales pitch. Heres what to listen for:
- A "ground floor opportunity" for you to realize a better return on this
investment than any other youre involved in.
- Guarantees of big profits in a short time.
- Claims that no risk is involved.
- Lots of pressure to act now because the "market is moving."
In addition, the FTC advises potential investors to:
Invest in opportunities you know something about.
Its unlikely you will make money in a business deal you cant understand or
verify. Dont rely on the sellers representation of the investments
Be skeptical about unsolicited phone calls about investments,
especially those from out-of-state salespeople or companies you never heard of. If the
deal sours, you may find it very hard to get your money back.
Get all the information you can about the company and verify
the data. Before you invest with any company, check the sellers materials
with someone whose financial advice you trust.
Beware of testimonials. Fraudulent
companies sometimes hire references to claim that the firms investments brought them
sudden wealth. Ponzi schemes where promoters use money from new investors to pay
high returns to early investors may explain the praises.
If in doubt, dont invest. Before
you invest, ask tough questions and get information from a variety of sources. If you
cant get solid information about the company and the investment, you may not want to
risk your money.
The FTC works for the consumer to
prevent fraudulent, deceptive and unfair business practices in the
marketplace and to provide information to help consumers spot, stop and
avoid them. To file a
complaint or to get free information
on consumer issues, visit
call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The
FTC enters Internet, telemarketing, identity theft and other fraud-related
Consumer Sentinel, a
secure, online database available to hundreds of civil and criminal law
enforcement agencies in the U.S. and abroad.
FEDERAL TRADE COMMISSION
FOR THE CONSUMER
Produced in cooperation with the North American Securities Administrators Association