Investment Scam

Most of us dream of becoming rich, of retiring early and taking long overseas holidays. Wouldn’t it be nice if we have so much money? We can just invest the money and wait for the returns while watching the sunrise in the beach.

This is not the case in real life. In real life, we go to work everyday, try to save whatever we can from our pay and when we have enough savings, we try to find ways to invest them so that we can maximise the returns.

Sometimes, when people get so excited about investing their money, their minds get clouded and make irrational decision. When presented with an opportunity to grow the money quickly, people tend throw caution to the winds.

Following are some of the top investment scams that are happening and that we should be wary about.

Pyramid scams

Pyramid scams promise to give you money if you invest or pay some money for goods and services then recruit others to join the scheme. It could involve any kind of goods or services. The goods or services will be overpriced and the way to recover your money and supposedly earn some more is to recruit others.

At the start of it all, it may seem like a good enough deal. You just have to convince people to join and then wait for the money to roll in. But then again how many people do you have to convince to get your original investment back? And how many people are gullible enough to fall for this scheme?

Ponzi Scheme

In this scam, you are promised very high returns for a secure investment. The way it works is that part of your investment is paid back to you as dividend on the first few months. As you are receiving dividends, you get excited and decide to invest more or tell other people about your good investment. Then other people will join in and invest their money.

The scheme can actually go on for a long time as long as there are a good number of new investors coming in. It will fall over if the swindler uses the money quickly or there are no new investors coming in.

This kind of scheme offers high returns like 10% per month or 120% per year. Before delving in, you might want to ask yourself what kind of investment would consistently give you that much return per month?

Advance fee fraud letter

This is also referred to as the “Nigerian letter scam”. In this scam, you will receive an official sounding letter or email from Nigeria (or it could be any other country like Sierra Leone, the Congo, Mauritius or Philippines) offering a business ‘proposal’. The letter sender is saying that he/she is a civil servant and that they will give you a benefit or reward if you help them offload a huge amount of cash or commodity. The letter/email sometimes pretend to be from a reputable organization so that you will think they are legitimate.

They will ask for your bank details so that they can transfer the reward to your account. It will all sound very good. Once you have given in, they will ask for some “advance fees” like tax and customs fee to enable the transfer. These fees are the real scam and can reach a sizable amount.

Pump and dump scams

This type of scam plays with the share prices of small publicly listed companies. The swindlers own a large parcel of shares. They then disseminate “hot tips” about the company to unsuspecting victims so that they will buy shares. They will wait for the price of share to go up (thus the term “pump”) and sell (dump) the share when it reaches a peak price.

Since they own a large parcel, their move will cause the share price to go down and victims are often left with shares with very small value.

The swindlers target their victims through the professional looking websites offering “hot share tips” or through internet forums or blogs. They can also reach victims by phone or text messages giving “hot tips”. They also hold seminars or hand out flyers to convince people to buy shares.

The list of scams and the creativity of the criminal minds does not stop here. It will only stop if people will not buy their idea or scam. The best thing that we can do if faced with any scam is to ignore it and say you’re not interested. You should always remember the old adage, “if it looks too good to be true, it probably is”.