The New Rash Of Investor Rip-Offs… And How To Avoid Them

Affinity fraud is dangerous and widespread, and it often goes unreported, as tight-knit groups instead attempt to work things out internally. It just goes to show that investment rip-offs are everywhere, and that even among friends, no investment idea can be simply taken at face value.

How to Spot (and Avoid) Investor Rip-Offs

  • Be skeptical of any investments that promise exceptional yields or guaranteed returns
  • Conduct thorough research about the company and/or any issuing personnel before investing
  • Don’t be rushed into making quick and/or uninformed investing decisions
  • Ignore unsolicited E-mails that attempt to hype some new or exciting investment opportunity
  • Don’t trust any investments whose framework and verifiable performance data aren’t in writing

Self-Directed IRAs & Proxy Trading Accounts

Particularly in recent years, scams and investor rip-offs have utilized self-directed IRAs and trading accounts to pilfer funds from unsuspecting investors who believed they could entrust the management of their accounts to unregistered and/or unqualified custodians. To defraud investors, scammers either:

  1. Used self-directed IRAs to hide Ponzi schemes and other fraudulent activity, or…
  2. Convinced investors to trust them to manage their IRAs or trade on their behalf

In either case, mismanagement, misappropriation, or outright theft resulted, and because of the tax implications of self-directed IRAs, it seems that investors were actually slower to react for fear that withdrawing their funds would make them susceptible to income or other taxes.

When it comes to self-directed IRA accounts, scammers are further empowered by the ability to purchase alternative investments including real estate, mortgages, metals, and private placement securities, any of which could be fraudulent in and of themselves.

Meanwhile, scammers who masquerade as expert traders can manufacture fake performance results with relative ease to gain investors’ trust. But because they are unlicensed and unregistered, there are no real safeguards protecting the investor in the (likely) event that the scammer subsequently steals or loses their account capital.

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Disclosure: I understand that Online Trading Academy instruction will prepare me to actively trade securities and/or other financial instruments for my own account at an appropriate financial firm ...

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TheExitFirm 2 years ago Member's comment

As the saying goes, when a person with money meets a person with experience, the one with money walks away with experience and the ones with experience walks away with the money. The rip-off merchants take this to a new level.

Emma Davidson 2 years ago Member's comment

Lol, I hadn't actually heard that one before.