Beware of Scams Involving High Return Investments
Scam artists will do anything to gain your trust, in
order to entice you to invest in their schemes. They may
make promises of huge profits from investing in offshore
markets, and may even guarantee the returns to give you
a sense of security. They are aware of the large amounts
of money you pay in taxes and your frustration with earning
low returns. They will pretend to share your opinions,
and sympathize with your frustration.
In one example, farmers in Eastern Ontario, Canada, were
approached through investment seminars about offshore
investment opportunities with guaranteed returns of 15%.
One potential investor was told that the large Canadian
banks use depositors' money to invest in these same offshore
markets for their own profits.
When someone offers you returns that are more than the
going rate, there is high chance that you will lose your
money. There are several red flags you should be careful
for when evaluating investment opportunities:
- Offshore investment opportunities. Once you
send your money out of your state or out of the country,
you lose any protections provided by law. Frauds and
scams frequently involve an offshore institution to
make it more difficult to trace the transactions. Once
your money is in someone else's control you may have
difficulty getting it back.
- Unsubstantiated guarantees. A guarantee is
only as good as the person or company making the guarantee,
and their credit rating. If they can borrow money from
the bank at 8%, and invest it at 15%, why are they willing
to pay you 15% on your money? Chances are, they need
you to lend them money because their credit is bad and
the banks will not lend them money.
- High return and low risk. The higher the promised
return on an investment, the greater the risk. If you
think that a guarantee lowers your risk, read the line
about unsubstantiated guarantees above.
To protect your money:
- Be wary of investment opportunities that offer guaranteed
high returns and low risk.
- Check out the investment opportunity, and the registration
of the person or company offering you the investment.
- Have a trusted professional, such as your financial
adviser, lawyer or accountant, evaluate any investment
opportunity pitched over the telephone or at an investment
For further information or to file a complaint, contact
a Securities Commission near you, or any of the following
Source: Ontario Securities Commission