Victory Investment

Posts Tagged ‘Fraud’

There are fraudulent people, posing as legitimate investors, and they often prey on an entrepreneur with the promise of making easy money. Such a promise can often be too tempting to pass up for those looking to invest, so they do not perform the right research. Therefore, different kinds of fraud often end up costing American businesses billions of dollars a year.

Fraudulent people know that this is a time when you’re most vulnerable, and it doesn’t matter what site you’re on, because someone is always willing to prey on you. You must be careful about choosing who to invest your money with.

While Go BIG Network is doing all we can to prevent fraudulent investors from entering the site, there are some things you need to watch for. Keep in mind: these tips are merely guides to help reveal potential danger. There is a possibility legitimate investors may or may not follow some of these practices.
With the following tips, you can better prepare yourself to avoid future situations of investment fraud. And you can never be too careful.  Even with the efforts of Go BIG Network, it is never a bad thing to be knowledgeable about the warning signs of potential investment fraud.

Don’t judge a person/company by their web site.  A flashy website does not always mean that an individual company is legitimate. Web sites can be created in just a few days. After a short period of taking money, a site can vanish without a trace.

The most successful frauds appear to be as legitimate a company as any other, so it is only natural that a fraudulent business or person would want to create an impressive website.

In addition to fraudulent websites, you should also be careful when dealing with online newsletters, bulletin boards, and e-mails regarding potential investments or investors. While not all of these are scams, you will have to be particularly careful when dealing with these resources.

It can be hard differentiating between legitimate and fraudulent websites and other online resources, so the next step – research – becomes vitally important.

Don’t invest in anything you are not absolutely sure about. Do your homework on the investment to ensure that it is legitimate. Make sure to also do your homework on the individual or company to ensure that they are legitimate.

While the internet is a breeding ground for potential investment fraud, it can also be a very valuable resource.  One of the easiest ways to do your homework on an investment is by checking out other web sites regarding this person/company. If this is your dream or company, you owe it to yourself to do the due diligence of really digging deep. If you care, the deal can wait a week until you find out how valid they are.

You can certainly use the internet to your advantage in this process. Even a simple Google search will tell you plenty about a person or company. If you cannot find any information about this potential investment, that can be concerning. It is always best to find other opinions, news, or reviews about this company, but be sure that this information also comes from a trusted source.

You can also research a company’s financial statements, including a history of whether or not the business has made money for people in the past. You can even call the company’s offices – or the people/businesses that it deals with – and get more information. The best thing you can do for yourself in preventing investment fraud is asking plenty of questions.

Be cautious when responding to (especially through unsolicited e-mail). Inquire about all the terms and conditions. Ask about every detail, and get every official paper they have. If they’re willing to fund you, they’re willing to go the extra mile for your sound mind.

And the last Golden Rule – If it sounds too good to be true, it probably is!

The sophisticated Nigerian 419 Scam that many people have become familiar with is one such scam. Beware of any international “firm” which requires a “fee” to be sent through a wire transfer to a foreign bank. The FBI warns against this and other similar scams. While the government is working to do all it can to crack down on these types of scams, it is still important that you are extremely careful with who you are dealing with.

An accredited investor, according the U.S. Securities and Exchange Commission is one who:

is a bank, insurance company, registered investment company, business development company, or small business investment company
has an individual net worth of or joint net worth with spouse, that exceeds million at the time of purchase
is a natural person with income exceeding 0,000 in each of the two most recent years or joint income with a spouse exceeding 0,000 for those years and a reasonable expectation of the same income level in the current year
is a trust with assets in excess of million, not formed to acquire the securities offered, whose purchases a sophisticated person makes

Utilizing all this information will give you the best chance to ensure your business avoids investment fraud. Many businesses are affected by investment fraud each and every year, mostly due to the reasons mentioned above. Don’t be lured by the promise of “easy money” and be sure to perform exhaustive research on your potential investment – after all, it is your money that you are dealing with.

Gold (element symbol Au) means ‘shining dawn’ in Latin and carries the atomic number of 79. The shiny metal holds value in coins, jewelry and artifacts, and has been a symbol of wealth and power since the beginning of recorded history. It’s been a store of value for more than 5000 years. Historical accounts of ancient Egypt say that gold was abundant than dirt. Millenium later, governments used gold for buying power and commerce, known as the gold standard, where paper money or instruments represented a store of gold reserves. The gold standard came to an end in 1971, and in 1975 the price of gold was finally allowed to fluctuate in the free market.

About 180,000 metric tons of gold have been unearthed in history, which is a little more than the amount needed to fill two Olympic-size swimming pools. More than half of that gold has been mined during the last 50 years. The world’s largest deposits are being depleted, and new large gold discoveries are rare. Extracting gold is most cost efficient in large, easily mined deposits. Since 1880, South Africa has been the source of most of the world’s gold supply. About 50% of all gold ever produced has come from South Africa. In 2007, China overtook South Africa as the world’s largest gold producer. Searching for gold is now a family affair involving small mines in developing countries, where women and children are often employed in hazardous labor at minimal pay. Motivated by rising prices, corporations and individuals are searching for gold the worldwide.

Holders of gold commonly store it in the form of bullion coins or bars, or through investment vehicles like ETFs (Exchange Traded Funds), futures contracts or mining company shares . Investing in or owning gold is used most commonly as a hedge against inflation, political or other economic uncertainty. The current economy is no exception. The continued collapse of the U.S. dollar and the failing of the United States economy under the mulatto Muslim President, Barack Hussein Obama, sent many investors to flock to gold as a possible safe haven.

The investment firm Goldman Sachs put a ,650 price target on gold for 2011. As of Oct 7, 2010, gold futures contracts reached an all-time high of ,364.77 (unadjusted for inflation). Like the recent internet and real estate bubble, some claim that gold is starting to show signs of a speculative bubble. With jewelry accounting for two-thirds of the demand for gold worldwide, some analysts say there is no fundamental support for the rally.

Advance fee fraud, romance scams, investment scams and other criminal operations related to gold are increasingly common. Such scams can range from a business claiming to be a gold bar, gold dust or gold coin supplier to an individual involved in the shipping, investment or sale of gold. Gold scams are common in West Africa but no country is immune. Scams can take place in any country. Investing or buying gold via the internet is especially suspectible to fraud and scams. Gold coins, bars and dust can all be manipulated in quality, or even fake.

Gold investments in West Africa are booming, and the relative political stability in Ghana, West Africa has made the country one of the most attractive new mining investments in Africa. Ghana is Africa’s second-largest gold producer after South Africa. Large international players like Newmont Mining Corp and AngloGoldAshanti have been joined by smaller players like Randgold Resources, Keegan Resources, and others. Industry observers see potential for more deposits in Ghana, and consider the country as still under-explored. New gold finds here fast become the acquisition target of large corporations.

Scam and criminal operations are growing at least as fast as the gold boom. More criminals and scammers mean the risk for getting in on the action in West Africa is very high. Gold scams can involve real government agencies and documentation. Criminals and fraudsters can speak the industry lingo and even provide detailed contracts, shipment details and photos of operations and facilities. Ghana gold scammers are quickly becoming experts.

Deals involving gold purchase, shipment or gold investment via the internet is especially prone to fraud and scams. For cases involving West Africa, a Ghana private investigator, due diligence or Ghana background check service should be used to verify representatives and business operations. For reliable and professional services, there is U.S.-based Wymoo® International which has global operations and field investigators in Accra, Ghana. Another option is Oak House Company which is a small private investigation firm in Accra. Investigators conducting due diligence or background checks for gold should have contacts Ghana government agencies like the Ministry of Lands and National Resources, eological Survey Department of Ghana, and the Precious Minerals Marketing Corporation (PMMC).

Many false companies are now registering with government agencies, making the verification process even more complex. Because of all the gold scams that can take place, conducting international due diligence or a background check is key. To be safe, all international gold deals and transactions should be verified by a professional investigation company.

All the Best,

S. Birch
© 2010 S. Birch

As an entrepreneur, you are inventive and energetic, capitalizing on a solid business plan and an opening in a particular industry or field. As an entrepreneur, you are also vulnerable. is a very real possibility that every entrepreneur must face. There are fraudulent people, posing as legitimate investors, and they often prey on an entrepreneur’s fund-raising efforts. This is a time when you’re most vulnerable, and it doesn’t matter what site you’re on, someone is willing to prey on you.

But small and start up businesses still require funding. Without help from and , it can be very difficult for an entrepreneur to get his or her business plan off the ground. So how can you be sure the investor you are dealing with is all he or she claims to be?

The following tips serve as a guide for entrepreneurs and small business owners to help them make smart business investments. Keep in mind; these tips are merely guides to help reveal potential danger. There is a possibility legitimate investors may or may not follow some of these practices. However, when it is your business plan and your investment, it is better to be safe than sorry. With the following tips, you can better prepare yourself to avoid future situations of fraud.

Although first impressions are usually strong and lasting, they should not be the deciding factor when selecting a private investor or investment group. Just because an individual or company has a flashy web site doesn’t mean it is legitimate. Web sites can be created in just a few days. After a short period of taking money, a site can vanish without a trace. Don’t judge a person/company by their web site. Look for other signs of legitimacy for their investment group or network.

One of the reasons investment fraud exists is because entrepreneurs and business owners aren’t always careful. Of course, you are busy and overwhelmed. But choosing an investment group for your business is no time for shortcuts. Don’t invest in anything you are not absolutely sure about. Do your homework on the investment to ensure that it is legitimate. Do your homework on the individual or company to ensure that they are legitimate.

Check out other web sites regarding this person/company. If this business plan is your dream or company, you owe it to yourself, to do the due diligence of really digging deep. If you care, the deal can wait a week until you find out how valid they are.

Be cautious when responding to special investment opportunities or offers (especially through unsolicited e-mail). Inquire about all the terms and conditions before agreeing to anything. Ask about every detail, and get every official paper they have. If they’re willing to fund you, they should be willing to go the extra mile for your sound mind.

Most entrepreneurs and small business owners have heard of the notorious Nigerian 419 Scam. Foreign investment scams and fraud are often sophisticated and difficult to track. Beware of any international “firm” which requires a “fee” to be sent through a wire transfer to a foreign bank. The FBI warns against this and other similar scams. There is little the U.S. federal government can do for businesses that succumb to these foreign funding scams.

Following these tips is not a surefire way to from infiltrating your business plan. Fraudulent investments are able to exist for a reason – they are resourceful, clever and dedicated to deceiving hard working entrepreneurs when they are at their most vulnerable. What this guide can do is offer you the best possible chance to spot these frauds and give your business plan the best possible chance for success.

It’s darn near impossible to open a newspaper today without at least one headline referencing financial fraud and abuse.  Frankly, the sad existence of financial criminals, whose incomprehensible greed and deceit should be labeled financial terrorism makes me sick to my stomach.  As the financial world shakes out its demons amidst a global meltdown, more
and more financial shenanigans are likely to come to light. The Bernard Madoff scheme has revealed that no investor is exempt, whether you are rich or super rich, whether you are a charity or even if you are in the “not-so-rich” column-everyone is fair game for these perpetrators.   Who is going to protect you?  It’s quite clear that federal regulators like the SEC have been asleep at the switch.  So who is an investor to trust?  How can you assure yourself that you are not a sitting duck?

There is no shortage of fresh financial scandals in the pages of the Wall Street Journal lately.  Perhaps the most visible has been the ponzi plot of Bernard Madoff and his wealthy “feeder” friends.  While the true cost of this elaborate heist may take years to uncover, the estimate of the impact hovers at over billion.  Then we have Allen Stanford, the Texas Financier who may have swindled about 50,000 investors out of US billion, give or take, using high, fixed rate CD’s.  The overwhelming majority of Stanford’s funds disappeared into a “black box” controlled by Stanford and his CFO, James Davis.  With a “black box model” the manager is essentially saying “trust us, we know what we are doing”. And in the latest allegation of financial fraud, as reported by the Wall Street Journal, hedge fund manager Paul Greenwood and Stephen Walsh stand accused of misappropriating over 0 million of investors’ cash and using it to fund their lavish lifestyles and rich man’s hobbies.  

On Wall Street, there’s no such thing as easy money or risk-less investments. If something sounds too good to be true, it probably is.  As the CFA Institute reveals, one of the red flags in the Madoff affair is that reported performance was too consistently good.  Other popular, Internet based investment scams purport to use ultra-safe “prime bank” financial
instruments from the world’s largest banks. Rewards without clear risk simply do not exist.  Here are some other clues that should have sent investors running the other direction:

The advisor who gave the investment advice and executed trades also held custody of the account (more will follow in the next paragraph on why this is important).

Madoff’s website described a sophisticated system for trading securities, but did not describe a process for managing
client assets Paying fines without admitting guilt are an unusual characteristic of the financial services industry (Madoff) Multiple complaints by regulatory agencies have been filed Account information is not transparent or difficult to obtain (ie. No online access) Statements appear doctored or printed in-house without the ability to audit account positions from an independent party

As a financial advisor, please heed my suggestion-never do business with a financial professional who does not separate the brokerage custody function from the advice function. More importantly, if you do not know what the advisor is buying on your behalf, find out. This lack of transparency, or “black box model” of investing is one my biggest reservations about
investing in hedge funds. I suspect that many investors are going to start asking many more questions of their managers and might be much less tolerant of black box managers in the future.

The first tip in safeguarding your assets is to do your due diligence by visiting the websites of the regulatory agencies that govern the advisor’s business.  Investors should get in the habit of visiting both the FINRA and SEC websites to review the firm’s and the advisor’s compliance history.

Next, understand the investment strategy.  If you don’t know what you are buying, then don’t buy it.  The nature of the risks involved can vary widely and should be well understood. Buying investments for the sake of their perceived complexity may sound sexy or alluring, but may not be a wise use of your dollars.

If it sounds too good to be true, it probably is. One of the red flags in the Madoff affair is that reported performance was too consistently good.  Perfect positive returns simply do not exist.  Returns will vary year to year, some by drastic variations.  Also, be sure to match investment strategy to reported performance.   In the case of Stanford, CD rates being offered were
paying obscenely high rates.  Risk and reward are directly related.  By definition, CD’s are on the low risk to (almost) no-risk side of the spectrum.  Something just did not jive there.

Be wary of “sure things”.  Legitimate investment professionals do not promise sure bets. Financial scams often begin with the allure of inviting only a “select group of people” to participate in such “crafty investment opportunities”. Do your
homework about what, if any, regulatory oversight exists with regard to the investment products being suggested to you.  For example, mutual funds, stocks and exchange traded funds are heavily regulated, while hedge funds and certain offshore investments are significantly less regulated.

Finally, you should consider limiting your exposure to any one investment.  No more than ten percent of your assets should be invested in a single fund.  Despite recent market volatility and the increased short term correlation of global assets, diversification is one of the most fundamental and enduring investment principles.

It’s darn near impossible to open a newspaper today without at least one headline referencing financial fraud and abuse.  Frankly, the sad existence of financial criminals, whose incomprehensible greed and deceit should be labeled financial terrorism makes me sick to my stomach.  As the financial world shakes out its demons amidst a global meltdown, more and more financial shenanigans are likely to come to light. The Bernard Madoff scheme has revealed that no investor is exempt, whether you are rich or super rich, whether you are a charity or even if you are in the “not-so-rich” column-everyone is fair game for these perpetrators.   Who is going to protect you?  It’s quite clear that federal regulators like the SEC have been asleep at the switch.  So who is an investor to trust?  How can you assure yourself that you are not a sitting duck?

There is no shortage of fresh financial scandals in the pages of the Wall Street Journal lately.  Perhaps the most visible has been the ponzi plot of Bernard Madoff and his wealthy “feeder” friends.  While the true cost of this elaborate heist may take years to uncover, the estimate of the impact hovers at over billion.  Then we have Allen Stanford, the Texas Financier who may have swindled about 50,000 investors out of US billion, give or take, using high, fixed rate CD’s.  The overwhelming majority of Stanford’s funds disappeared into a “black box” controlled by Stanford and his CFO, James Davis.  With a “black box model” the manager is essentially saying “trust us, we know what we are doing”. And in the latest allegation of financial fraud, as reported by the Wall Street Journal, hedge fund manager Paul Greenwood and Stephen Walsh stand accused of misappropriating over 0 million of investors’ cash and using it to fund their lavish lifestyles and rich man’s hobbies.  

On Wall Street, there’s no such thing as easy money or risk-less investments. If something sounds too good to be true, it probably is.  As the CFA Institute reveals, one of the red flags in the Madoff affair is that reported performance was too consistently good.  Other popular, Internet based investment scams purport to use ultra-safe “prime bank” financial instruments from the world’s largest banks. Rewards without clear risk simply do not exist.  Here are some other clues that should have sent investors running the other direction:

•The advisor who gave the investment advice and executed trades also held custody of the account (more will follow in the next paragraph on why this is important).

•Madoff’s website described a sophisticated system for trading securities, but did not describe a process for managing client assets

•Paying fines without admitting guilt are an unusual characteristic of the financial services industry (Madoff)

•Multiple complaints by regulatory agencies have been filed

•Account information is not transparent or difficult to obtain (ie. No online access)

•Statements appear doctored or printed in-house without the ability to audit account positions from an independent party

As a financial advisor, please heed my suggestion-never do business with a financial professional who does not separate the brokerage custody function from the advice function. More importantly, if you do not know what the advisor is buying on your behalf, find out. This lack of transparency, or “black box model” of investing is one my biggest reservations about investing in hedge funds. I suspect that many investors are going to start asking many more questions of their managers and might be much less tolerant of black box managers in the future.

The first tip in safeguarding your assets is to do your due diligence by visiting the websites of the regulatory agencies that govern the advisor’s business.  Investors should get in the habit of visiting both the FINRA and SEC websites to review the firm’s and the advisor’s compliance history.

Next, understand the investment strategy.  If you don’t know what you are buying, then don’t buy it.  The nature of the risks involved can vary widely and should be well understood.  Buying investments for the sake of their perceived complexity may sound sexy or alluring, but may not be a wise use of your dollars.

If it sounds too good to be true, it probably is. One of the red flags in the Madoff affair is that reported performance was too consistently good.  Perfect positive returns simply do not exist.  Returns will vary year to year, some by drastic variations.  Also, be sure to match investment strategy to reported performance.   In the case of Stanford, CD rates being offered were paying obscenely high rates.  Risk and reward are directly related.  By definition, CD’s are on the low risk to (almost) no-risk side of the spectrum.  Something just did not jive there.

Be wary of “sure things”.  Legitimate investment professionals do not promise sure bets. Financial scams often begin with the allure of inviting only a “select group of people” to participate in such “crafty investment opportunities”. Do your homework about what, if any, regulatory oversight exists with regard to the investment products being suggested to you.  For example, mutual funds, stocks and exchange traded funds are heavily regulated, while hedge funds and certain offshore investments are significantly less regulated.

Finally, you should consider limiting your exposure to any one investment.  No more than ten percent of your assets should be invested in a single fund.  Despite recent market volatility and the increased short term correlation of global assets, diversification is one of the most fundamental and enduring investment principles.

DATELINE:  BOSTON, MA…
Do you know how to protect yourself from the next Bernie Madoff when you choose a broker or make an investment? Attorney Lee Holland, of Tarlow, Breed, Hart & Rodgers, P.C. of Boston, MA, firmly believes in the age-old adage that if an investment opportunity sounds too good to be true it probably is.

However, Attorney Holland, who is also a Public Arbitrator for the Financial Industry Regulatory Authority (FINRA), the largest independent regulator for all securities firms doing business in the United States, urges investors to go a step further to arm themselves against the potential of investment fraud.  

“Education and information are the best tools against possible investment fraud. As a FINRA arbitrator I see the aftermath of poor choices made by both investors and financial industry professionals. As a result of this experience, I have become a strong proponent of promulgating information to better educate those on both sides of the investment equation and have found FINRA to be a great educational resource,” explains Holland.

Despite the high profile cases of investment fraud in the headlines, the potential for new fraudulent investment schemes may increase as investors, eager to recoup their losses in times of continued economic uncertainty, fall prey to a new generation of scam artists.

To help avoid investment fraud:
1.    Verify the license of anyone promoting an investment opportunity:
•    For brokers check www.FINRA.org
•    For investment advisors visit www.adviserinfo.sec.gov
•    For insurance agents check your state insurance department
•    For all sellers check with your state securities regulator
2.    Verify that an investment is registered:
•    Check investment registrations at www.sec.gov/edgar.shtml
3.    Be aware of the warning signs of investment fraud:
•    Unreasonable guarantees
•    Unregistered products
•    Promise of no fluctuations in returns
•    Complicated investment strategies
•    Undocumented securities or stocks
•    Incomplete or inaccurate account statements
•    Pushy salespeople warning you must “act now”
4.    Avoid fitting the investment fraud victim profile found in a 2007 FINRA survey:
•    Victims often own high-risk investments, including penny stocks, promissory notes, futures, options or private investments in foreign currency;
•    Victims tend to rely primarily on friends, family, co-workers for investment advice (70 percent)
•    Victims can be too open to new investment information (for example, three times as many victims went to a free investment seminar than the national sample)
•    Victims may fail to check the background of an investment or a broker
•    Victims are often unable to spot persuasion tactics used by fraudsters

Holland urges all investors to invest their time becoming better educated, before investing their money, to avoid the risk of becoming a future victim of investment fraud. Attorney Holland, an Associate in Tarlow, Breed, Hart & Rodgers’ Litigation Group, has extensive experience with alternative dispute resolution, both as an advocate and as a neutral.

FINRA
FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through comprehensive regulation. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms; writing and enforcing rules and the federal securities laws; informing and educating the investing public; providing trade reporting and other industry utilities; and administering the largest dispute resolution forum for investors and firms.

Tarlow, Breed, Hart & Rodgers, P.C.
Formed in 1991, Tarlow, Breed, Hart & Rodgers, P.C. is committed to providing high quality, comprehensive legal services to its clients. Featuring a breadth and depth of experience and perspective usually found only at larger law firms, Tarlow, Breed, Hart & Rodgers. P.C. offers sophisticated legal counsel to entrepreneurs, businesses, individuals, families, and institutions.

Tarlow, Breed, Hart & Rodgers’ areas of expertise include corporate law, employment matters, mergers and acquisitions, litigation and dispute resolution, estate planning, taxation, real estate, bankruptcy, and municipal law.

The offices of Tarlow, Breed, Hart & Rodgers, P.C. are located at 101 Huntington Avenue, Prudential Center, in Boston, MA 02199. For additional information, or to arrange for a consultation, please call 1-617-218-2000, e-mail info@tbhr-law.com, or visit www.tbhr-law.com.