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These scams are usually telemarketed in a very high pressure manner and often these fraudsters will follow up through the mail providing slick brochures and other impressive documents. Often the retirement funds of the elderly are targeted.
The selling point that hooks the victim is usually the alleged higher than usual return on investment that can be expected.
In many cases, these frauds are simply classic Ponzi scams where any dividends or interest paid to the victim come from funds provided by new victims contributions, while the principal which the victim has invested has been stolen.
It is not unusual in these investment scams for the perpetrator to actually provide an exceptional high return to the victim in a short period of time as a come on, often claiming this to be tax-free. Usually this occurs when a conservative and cautious victim invests a small amount, but the fraudster knows the victim has substantial funds available.
An example of this method is as follows:
The fraudster presents Rico McPato with a "no risk" proposition where the return is estimated to be 50% in six months or less. McPato, a wealthy and worldly gentleman is skeptical, but invests $1,000. In a month or so, the fraudster shows up at McPato's door with a cashier's check for $750, telling McPato the fund (or whatever) did even better than expected and the $750 is a dividend on the $1,000 principal and that no tax need be paid.
McPato is then convinced the scheme is legitimate and immediately invests and additional $100,000 with the fraudster. The fraudster may then simply disappear, or if it a Ponzi scam, the fraudster will occasionally provide "dividends" to the victim. These "dividends" come from the "investment funds" paid in to the fraudster by new victims.
Usually, in all these cases, the fraudster hawking the spurious investment makes it sound as if the victim will receive an exceptionally high return in a risk-free situation and requires that a decision be made immediately concerning this investment.
At Loss Prevention Concepts, Ltd., we simply recommend that you never invest anything with any unsolicited caller offering investment opportunities.
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