Don’t Become a Ponzi Scheme Victim Through Online Fraud

It’s really difficult not to dredge up the old saying, “There’s a sucker born every minute!” Almost everyone has heard it, but do they pay attention? Apparently not because there is a whole industry of Ponzi schemes that is thriving even after Bernard Madoff was sent to prison.

Here is a fact for consumers to understand. Ponzi schemes are the most common type of investment fraud and they are perpetrated in a number of ways. People jump into these schemes both offline and online too leading to a host of problems including loss of savings, identify theft and mounting legal fees.

If you are the typical middle class wage earner, you may be thinking Ponzi schemes are only targeted at the wealthy. That is simply not true. The Billionaire Boys Club was a $53 million scam promising excessive returns on money invested by middle class investors. It’s hard to resist promises of 12% returns. But here’s another old saying that should be kept in mind: If it sounds too good to be true, then it probably is.

Most readers know these old sayings are true but seem to be willing to toss them out the window when a smart slick salesman claims to have figured out how to beat the market. Online stock traders, local brokers, and investment analysts spend millions of dollars on technical analysis software trying to beat the market and yet consumers will hand over millions to people who simply claim they can earn big money over the long term. It really doesn’t make sense except on an emotional level.

Watching retired middle class women talk about how Madoff took every dime of their retirement money is painful. You would think the Madoff situation would have led to heightened consumer awareness and a reduction in the number of Ponzi schemes. But that is not so.

The Texas Securities Commissioner Denise Crawford told USA Today reporter John Waggoner, “In my office in Texas, 80% of our cases are Ponzi schemes.”

Ponzi schemes can take many different forms too and that may be one reason why so many people find themselves victims. Ponzi schemes do not just involve stocks and money markets. They run the gamut of creative ideas.

For example, a Nebraska police officer ran a Ponzi scheme involving martial arts clothing and golf outings. Other schemes have involved foreign exchange trading, real estate and automated teller machines.

Today many people get involved in Ponzi schemes initially through the internet. One of the key ingredients for a successful Ponzi scheme targeting the average investor is the scheme creator has to be a good sales person. People go online looking for an opportunity, come across a website loaded with certification logos and promises of investment success and decide to fill in the contact box. The schemer then contacts the person by phone or email and usually invites them to a nearby seminar. The hunt for a sucker is on!

There have also been many cases where the investor finds them involved in an elaborate scheme of both investor fraud and identify theft. To invest in the Ponzi scheme you have to eventually give your social security number and other personal information. That’s all the person committing fraud needs.

So how do you prevent becoming a Ponzi scheme victim? First you have to remember those old sayings. Don’t be a sucker and follow your instincts. If you get excited about an investment possibility and everyone else is telling you it is risky or doesn’t make sense….listen to them. You should not ever sign up for anything online until you do your homework on the business.

For example, you can to the finra.org website of the Financial Industry Regulatory Authority and check for complaints filed against brokers who operate offline and online.

You should also spend time checking with state and national licensing and monitoring agencies and the Better Business Bureau. Failing to investigate a company before investing is probably the number one reason people find themselves involved in disreputable business. And sad to say, many people make it easy for schemers to steal their identity by freely giving out personal information.

Related Articles

• 3 Easily Avoidable Credit Pitfalls
There are so many credit problems out there that it can feel like there is nothing you can do to avoid bad credit. You
• How About Do It Yourself Credit Repair?
Is it possible for someone to patch up their credit on their own without using a debt consolidation service? Yes, it sure is! If you
• New Ways To Save Money
Everyone is looking for new ways to save money. Clipping coupons, shopping around for the best deals on groceries, and buying generic are tried
• Good Credit Not So Good?
In a shocking turn of events, credit card companies have recently concocted a new scheme to make more money. Unlike in the past, when credit
• The Fair Credit Reporting Act
The three credit report agencies, Equifax, Experian, and Trans Union can be said to have quite a lot of power, for they hold the information