Identifying a Ponzi Schemer: 7 Steps


Over the previous two decades, I have worked in the financial industry and learned the ins and outs of investing through good fortune and bad luck. Unfortunately, it’s not uncommon for confident investors I interact with to insist on holding onto deeply held yet fundamentally flawed beliefs. In this post, we’ll review some warning signs that should make you suspicious of any investment offer. Find out the best info about Cryptocrime.

There are commonalities among investment scams:

1. Secrecy: No investment scheme worth it’s salt can be kept secret from financial advisors, accountants, lawyers, and anyone with even a passing knowledge of investments. The purpose of this secrecy in many frauds is to make the victim feel like they are “in the know” and have access to assets usually reserved for the privileged few. The scammers want you to keep believing what they’re telling you, so they require you to stay quiet about your involvement.

2. High Rates of Return: At what levels should an investor’s capital grow? When something seems too good to be true, it usually is. While earning 20% on hazardous investments is conceivable, such returns are not sustainable in the long run. If an investment yields a higher return than is typical for the asset class, red flags should immediately go up. Talk to a professional financial counselor if you need help understanding your investment plans.

3. Lack of Proven Results: The results of any investment program should be verifiable by an independent party, such as an accounting or law company. In addition, the program’s leaders should have clean records and a history of profitable investments. Furthermore, any new venture would have a suitable product, a comprehensive business plan with realistic financials, and a well-thought-out strategy for promoting the company. If there is no precedence, don’t even bother.

4. Inadequate or no supporting documentation: A legitimate investment will have supporting documentation, such as a prospectus or offering memorandum (the latter is used for private placement programs only available to accredited investors). Detailed contracts addressing every investment proposal aspect would also be available. Demand honesty in all matters.

5. Insurance policies are the only investments I am aware of that offer guarantees: But, unfortunately, a personal guarantee or a promise of a specific rate of return is worthless. Private security is only as good as the assets of the person making it (after all, if they had the money for safety, they wouldn’t need yours) if your investment fails.

6. Lack of State Registration for Offering Investment to the Public: In most circumstances, the person creating an investment must register it with the State before offering it to the public. Also, the salesperson or advisor offering the transaction must hold a valid State securities or investment advisor registration. A red flag would be the absence of such registration.

7. Offshore Tax Benefits: No Offshore Tax Havens for Americans. In other words, US citizens are subject to taxation on all their income, regardless of where it comes from. Those who say you can lower or eliminate your tax burden by relocating to a foreign country are false. Attempting to avoid paying taxes is a surefire way to cause trouble. While there are valid arguments for establishing an offshore entity to protect one’s assets, doing so will not result in significant tax savings.

I have listed seven suggestions, but I’ve got one more…

8. There is a particular fascination with investing on a global scale: It’s out of the ordinary and unusual. The one catch is that you send your money and possessions overseas, where you may never see them again. A good excuse for someone’s inability to deliver on expected investment returns is the complexity of international financial regulations and legislation. So you should invest locally.

Compulsions of Want and Need

People invest in these schemes out of a need for quick cash or a taste for freebies. Financial security requires forethought and discipline to save some of your earnings rather than spending it all on frivolous pursuits. A major setback to one’s quality of life might result from falling for any financial hoax. Do not engage in that activity. If you study and follow the rules of supply and demand, you will reach your goals in due time.

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