Charity Fraud involves using fraudulent measures to get money from people who believe they are making donations to charities. Last week we talked about an instance of Charitable Gift Annuity Fraud (CGA), but in light of the recent tragic events in Boston, we will discuss it again, because now is a time when fraudulent charities may be popping up.
Don’t let fraudulent charities deter you from helping those in our country who are in need.
Arnold and Slack received about $600,000-small change in comparison to the supposed value of the diamond mine
In 1872 a group of investors, including Charles Tiffany of Tiffany and Co., were swindled by cousins Philip Arnold and John Slack into believing a Californian mine held millions in diamonds. According to History.com,
Sometimes even the most reputable looking investments, in this case a charity, is using deceptive tactics to entice investors
According to a press release by the Securities and Exchange Commission in February, 2012, a husband and wife team have been charged with defrauding seniors by selling charitable gift annuities, when in fact only a small amount was directed to the charities, and the rest went to paying high salaries and third-party commissions.
A Ponzi scheme uses money put in by later investors to pay earlier investors
Investor’s Watchdog has partnered with Page Perry, LLC to offer free videos, called Investor’s Watchdog University, in an attempt to help protect investors from financial fraud. The videos provide investors with clear explanations and definitions of the most common investment products and red flags to help investors stay protected.
No one knew the real story, that ZeekRewards was nothing but a well disguised Ponzi scheme.
According to an article from firstcoastnews.com called “ZeekRewards scam hits N.C. town hard”, ZeekRewards took at least $600 million from over one million investors, 50,000 of whom were from North Carolina.
Don’t automatically give a person credit just because they sound credible.
Keeping with the theme of red flags, let’s discuss another set of red flags that you should be on alert for. The sociopath. One in twenty-five people are sociopaths. Sociopaths can hold any job, they are highly functional and often achieve higher education degrees. We often see these people in power.
If you notice one of these red flags, it means you need to do more research into the potential investment and/or your advisor.
Sometimes it’s a good idea to review things we have already learned. In this case, I believe we could all benefit from a refresher course on the Red Flags of Fraud, as provided free to investors on the FINRA website. While not exclusive, this is a great sample of some of the most important points you need to remember. If you notice one of these red flags, it means you need to do more research into the potential investment and/or your advisor.
- Guarantees: Be suspect of anyone who guarantees that an investment will perform a certain way. All investments carry some degree of risk.
- Unregistered products: Many investment scams involve unlicensed individuals selling unregistered securities—ranging from stocks, bonds, notes, hedge funds, oil or gas deals, or fictitious instruments, such as prime bank investments.
- Overly consistent returns: Any investment that consistently goes up month after month—or that provides remarkably steady returns regardless of market conditions—should raise suspicions, especially during turbulent times. Even the most stable investments can experience hiccups once in a while.
- Complex strategies: Avoid anyone who credits a highly complex investing technique for unusual success. Legitimate professionals should be able to explain clearly what they are doing. It is critical that you fully understand any investment you’re seriously considering—including what it is, what the risks are and how the investment makes money.
- Missing documentation: If someone tries to sell you a security with no documentation—that is, no prospectus in the case of a stock or mutual fund, and no offering circular in the case of a bond or alternative investment—he or she may be selling unregistered securities. Also beware of stocks without stock symbols.
- Account discrepancies: Unauthorized trades, missing funds or other problems with your account statements can be the result of a genuine error—or they can indicate churning or fraud. Keep an eye on your account statements to make sure account activity is consistent with your instructions, and be sure you know who holds your assets. For instance, is the investment adviser also the custodian of your assets? Or is there an independent third-party custodian? It can be easier for fraud to occur if an adviser is also the custodian of the assets and keeper of the accounts.
- A pushy salesperson: No reputable investment professional should push you to make an immediate decision about an investment, or tell you that you’ve got to “act now.” If someone pressures you to decide on a stock sale or purchase, steer clear. Even if no fraud is taking place, this type of pressuring is inappropriate.
If you have some other red flags you want to add to the list here, email them to us at firstname.lastname@example.org, or mention them in the comments below. We appreciate your participation!
Part of Investors Watchdog’s mission is to make investors aware of the risks and abuses in the investment marketplace. If you would like further information, we invite you to follow this blog and to visit the investment information and blog published at www.pageperry.com.
Accused of laundering $15 million in ill-gotten profits from an investment scam allegedly run by Mutual Benefits
Recently published article “Fort Lauderdale executive convicted of money-laundering plot” on MiamiHerald.com, tells of a Fort Lauderdale executive convicted of a money-laundering conspiracy. (more…)
Individual investors have more than $1 trillion in bond investments today
Bonds are currently riskier than stocks. For example, If the yield on the 10-year Treasury bond rises to 5%, which is where it was before the financial crisis, bond funds could plummet 25%, (“Bonds are riskier than stocks,” CNNMoney). (more…)
Bonds have become so risky that bond-buyers are now being classified as “aggressive” investors by UBS.
Warnings about bonds and a bond market bubble continue to grow. Investors may believe that bonds are safe, like certificates of deposit, but that is simply not the case. In fact, TD Ameritrade CEO Fred Tomczyk recently told the firm’s advisers, at an annual conference, to be aware of the risks of bond investments. TD Ameritrade’s retail division even sent an article to its individual investors entitled “Bonds Are Not Gravity Defying: Be Prepared” (“TD’s Tomczyk warns about bond route,” InvestmentNews). (more…)
However, according to opinions in the financial press, both junk bonds and investment grade corporate bonds are overbought and positioned for a correction.
Junk bonds are at the end of their rally and look like a bubble ready to burst according to many analysts. Junk bonds have been driven to record levels by yield-seeking behavior. Now that a correction may be near, fund managers are reacting in two ways: some are sacrificing some yield by upgrading the credit quality of their portfolios, and others continue to seek higher yield by buying smaller, riskier deals. For high-yield bond fund investors and their advisers seeking to manage risk, it is important to know the difference and to know what is producing the yield they seek. (more…)
Personal financial advice is often not in the customer’s best interest. Much of it is suspect and overstated.
Los Angeles Times writer Helaine Olen has written a book entitled “Pound Foolish: Exposing the Dark Side of the Personal Finance Industry.” Having written on the subject for nearly 20 years, Ms. Olen tells in her book how the financial advice industry feeds off of popular trends and caters to customers’ worst instincts, as Vanguard Funds founder John C. Bogle once said (“New book slams financial advice industry,” InvestmentNews). (more…)
With bond prices still near record highs and interest rates at record lows, higher interest rates and lower Treasury bond prices are inevitable – it is only a question of when that will occur. Investment grade corporate bonds are also seen as being at risk.
The Wall Street Journal is continuing its outpouring of articles warning of a coming debacle in bonds and bond mutual funds, especially U.S. Treasury securities. Although the Federal Reserve is not expected to raise interest rates this year, after the fiscal cliff deal, U.S. Treasuries experienced a sell off (“Why Bond Funds Could Get Dicey This Year”). (more…)
Some of the typical risks and problems associated with alternative investments are risk of loss of principal, excessive fees, lack of transparency, illiquidity, and high correlation with asset classes (like stocks) that they purportedly hedge.
The panic of 2008, continued stock market volatility and the problem of how to reduce debt and close deficits have flattened investor confidence in the stock market, and, consequently, traditional asset allocation models. What was traditionally viewed as a balanced portfolio – 60% stocks and 40% bonds – is now viewed by some as high risk. (more…)
That is not investing; it is speculation.
Investors are reportedly beginning to shun exotic and niche exchange traded funds. That has spurred sellers to market them more aggressively, because many of the more than 200 exchange traded funds launched in the past year are exotic and niche ETFs. Those who recommend them are trying to capitalize on investors’ worst instincts. (more…)
Conflicting interests are not just a by-product of Wall Street’s business, they are the very essence of it.
The Financial Industry Regulatory Authority (FINRA) is reportedly interested in examining the conflicting interests that its member firms have with their customers. (more…)
Investors are either not being told about the risks or not fully appreciating the risks.
Many fixed income investors, desperate for yield, are putting their hard-earned savings in bond funds that offer attractive total returns and yields but carry significant risk. Virtually all the experts observe that both the corporate and municipal bond markets are in a bubble that will inevitably burst and destroy many investors’ savings. The SEC has stepped up efforts to educate investors about the perils of bonds and bond funds, which have traditionally been regarded as relatively low risk. The clear message is: that is no longer the case. (more…)
Hedge fund managers blamed the poor performance on a “too cautious” approach
The Wall Street Journal reports that hedge funds gained 5.5% on average in 2012 while the S&P 500 stock index gained 16% – (more…)
U.S. District Judge Linda Reade calculated that when BLP collapsed, 111 investors were owed roughly $56 million
According to a recent article written by Courthouse News Service, Martin Sigillito of St. Louis, an attorney and an American Anglican bishop, has been sentenced to 40 years in prison. He is said to have devised the largest Ponzi scheme in local history. (more…)
Should this type of elaborately planned financial dishonesty be tolerated by FINRA?
The Financial Industry Regulatory Authority apparently tolerates certain instances of clear and unequivocal dishonesty by brokers. While the harm to investors that flows from that dishonesty may vary from Madoff magnitude to nothing, dishonesty – when it is irrefutable – should not be tolerated by an industry that holds itself out as trusted professional financial advisors. Yet it is tolerated. (more…)