Contact us

[ return to list ]

Steer Clear of Online Investment Scams

Can you imagine life without the Internet? At this point, most of us cannot. However, there is a potential downside to the technology: It has become even easier for con artists to scam unsuspecting investors out of their funds.

Many online scams use the Internet as the new “wrapper” on an old scheme. For instance, fraudulent come-ons may be communicated in cyberspace through investment newsletters, bulletin boards, web sites or spam e-mail. The crooks can reach a wider audience than before, so it is more likely that you will be exposed to increased risks.

Caution: Before we go any further, it is important to recognize that reputable firms often use the Internet for legitimate purposes. This is not to say you should avoid online contact entirely—it can be a valuable tool for investors. But you should watch out for the following scams that are designed to trick you out of your hard-earned money.

Pump and dump: This scheme encourages you to buy a stock quickly before the price goes up. Frequently, the con artist claims to have inside information about an impending development or touts a “guaranteed” method for picking stocks. The reality is that the advice is provided by paid promoters who will profit from the immediate sales. Once they pocket their cash, the price of the stock drops and investors lose their money.

Pyramids: You will often read messages stating that you can turn a small investment—say, as little as $5 or $10—into a small fortune in a matter of weeks. This can be a tip-off to the electronic version of the classic “pyramid scheme” where participants make money by recruiting new investors. Those at the top of the pyramid skim off the profit while the others are left holding the bag.

Risk-free frauds: Don't be enticed into exotic undertakings that are guaranteed to be risk-free. There is an inherent risk to virtually every type of investment. Be wary of promises of spectacular returns—if something sounds too good to be true, it probably is.

Offshore frauds: The Internet has removed many of the logistical obstacles to offshore investments. Nevertheless, you should be especially careful when considering investment opportunities in foreign countries. Fraudulent offerings are often targeted to high-income individuals looking to gain an edge.

Practical approach: A little common sense goes a long way. Of course, you can't insulate yourself completely from investment scams. The best protection is to rely on advisers you know and trust to assist with your investment decisions.

[ return to list ]




	[ return to list ] Steer Clear of Online Investment Scams Can you imagine life without the Internet? At this point, most of us cannot. However, there is a potential downside to the technology: It has become even easier for con artists to scam unsuspecting investors out of their funds. Many online scams use the Internet as the new “wrapper” on an old scheme. For instance, fraudulent come-ons may be communicated in cyberspace through investment newsletters, bulletin boards, web sites or spam e-mail. The crooks can reach a wider audience than before, so it is more likely that you will be exposed to increased risks. Caution: Before we go any further, it is important to recognize that reputable firms often use the Internet for legitimate purposes. This is not to say you should avoid online contact entirely—it can be a valuable tool for investors. But you should watch out for the following scams that are designed to trick you out of your hard-earned money. Pump and dump: This scheme encourages you to buy a stock quickly before the price goes up. Frequently, the con artist claims to have inside information about an impending development or touts a “guaranteed” method for picking stocks. The reality is that the advice is provided by paid promoters who will profit from the immediate sales. Once they pocket their cash, the price of the stock drops and investors lose their money. Pyramids: You will often read messages stating that you can turn a small investment—say, as little as $5 or $10—into a small fortune in a matter of weeks. This can be a tip-off to the electronic version of the classic “pyramid scheme” where participants make money by recruiting new investors. Those at the top of the pyramid skim off the profit while the others are left holding the bag. Risk-free frauds: Don't be enticed into exotic undertakings that are guaranteed to be risk-free. There is an inherent risk to virtually every type of investment. Be wary of promises of spectacular returns—if something sounds too good to be true, it probably is. Offshore frauds: The Internet has removed many of the logistical obstacles to offshore investments. Nevertheless, you should be especially careful when considering investment opportunities in foreign countries. Fraudulent offerings are often targeted to high-income individuals looking to gain an edge. Practical approach: A little common sense goes a long way. Of course, you can't insulate yourself completely from investment scams. The best protection is to rely on advisers you know and trust to assist with your investment decisions. [ return to list ]
1105 Dumont Court, Matthews NC 28104 Fax:704-845-0928 © Copyright 2004 Desai & Desai, LLP