Fraud Can Spoil Your Green Investment Strategy
In part two of this three-part series, writer Cesar Zambrano addresses the dangers of investment fraud. Please note that these articles do not constitute specific investment advice and are merely the opinion of the author. If you have investment questions, please speak with a licensed investment counselor. — Julia Wasson, Publisher
After reading Part 1 of this series and doing your homework on the Green industry, you are almost ready to develop your investment strategy and begin execution. Unfortunately, we must make a sidestep and discuss the potential of investment fraud and what you can do to prevent it from ruining your day. A sad fact of the business world is that wherever there is an opportunity for profit, the criminal element has developed well designed scams to fleece unsuspecting “marks” of their investment capital.
According to the FBI, securities and commodities fraud accounts for over $40 billion a year in losses. Several other investment vehicles made popular by the Internet have drawn more than their fair share of scam purveyors, and lessons can be learned from their recent experiences. For example, currency trading was an easy target since you never could see your business partners “face-to-face.” Unscrupulous brokers promised enormous profits. Reviewing forex [foreign currency exchange] brokers became a must, a lesson now taught in most every currency trading course.
The criminal element is well organized, experienced, and adept at separating you from your hard-earned cash. If currency trading is no longer as easy, swindlers will always move to the newest and most popular “greener pasture.” Green investments may be the next growth area for crooks.
A favorite scheme is the “pump-and-dump.” A criminal contacts hundreds of people with insider news of a dramatic run-up in revenue for a thinly traded stock. Enough people bite and buy on the unsolicited tip to cause the stock value to increase, thus creating the liquidity for the crook to sell and make his gain. The stock promptly plummets, leaving its new holders wondering what happened.
Be wary when you are approached out of the blue unsolicited. Enticing offers may be made over the phone, via direct mail or appear in print ads in local newspapers or magazines. Crooks also recognize the potential of cyberspace. The same scams that have been conducted by mail or phone can now be found on the Internet or in emails.
Watch out for promises of huge profits at little or no risk. This is the oldest come-on there is, but it is effective, since it appeals to the greed in us all. The crafty crook will mention profits that are generally large enough to make you interested and eager to invest, but not so large as to make you overly skeptical. As you have been told since you were a child, if it sounds too good to be true, it most likely is, so turn and walk away.
Urgency is another giveaway. If it has to be bought now before others find out, stop, and sleep on it. The swindler does not want you to think about it or check it out. He wants your money now.
Lastly, the con artist will resist any attempt on your part to ask questions or bring in third parties, like your attorney, to review the investment. He may even resist putting anything in writing, which should be your cue to ask him to leave.
Investment fraud generally happens to people who think it could never happen to them. Interestingly enough, Department of Justice studies show that people with some college or a college degree are the most susceptible to con artist scams. However, Green investment scams need not ruin your day. There are legitimate investment options that your broker can tell you about. We’ll discuss one popular option in Part 3. Stay tuned.
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Cesar Zambrano is a writer at ForexFraud.com.
Part 2: Fraud Can Spoil Your Green Investment Strategy (Top of Page)