|Common Scams to Watch Out For|
Here are the most common scams you may encounter when considering an investment:
Ponzi or pyramid schemes promise high returns for investors but collapse when new investors can’t be found. These schemes use funds from new investors to pay off the initial investors, but the scammer usually has spent the money before it collapses.
Promissory notes are typically used by companies to raise money by selling a portion of their debt to an investor. You should always check with the Iowa Insurance Division at 877-955-1212 whether the company is a legitimate company before investing in promissory notes.
High-yield investment product scammers claim access to the world’s leading financial institutions or banks and suggest they are enrolling you in an elite investment venture. These scams promise high returns at little or no risk to you. Be wary of high-yield investments using the term “prime bank” investments.
Affinity fraud targets identified groups such as religious or ethnic communities. Scammers begin by targeting a leader or respected member and using that member’s influence to attract more investors in a pyramid-type scheme.
Private placement offerings, or regulation D, rule 506 offerings can be used by small companies to raise funds. The implementation of this rule means investors exceeding a certain income may be approached for investments, but these investment offerings are unregulated and oftentimes are scams or very risky investments.
Oil and gas drilling programs can be scams, especially those claiming a particular well is guaranteed to produce high returns or have attractive tax advantages. Click here to learn more.
Gold and precious metal are always risky investments. It may be a scam if the seller is convincing you to invest in gold mining or to purchase gold or other precious metals, which will be delivered to a secured facility. Be sure the company is genuine, and take measures to ensure the gold or precious metal you invested in does exist. Click here to learn more.
Free dinner seminars are often advertised in local newspapers, on websites or through mass-mailed invitations or emails. Many of these seminars are intended to result in the sales of investment products and attendees opening new accounts with the sponsoring firm whether at the seminar or in later contact with attendees.
Self-Directed IRA fraud typically occurs when a scammer misrepresents the responsibilities of self-directed IRA custodians. Scammers may falsely suggest your investment is protected or that your self-directed IRA custodian will investigate the investment offer for you.