cryptocurrency

Walking Dead Investments: Zombie Financial Scams – Forbes


I like to look at what’s on the radar screen of state securities regulators. These watchdogs are the true cops on the beat when it comes to a variety of financial scams.

Here’s a list of top swindles involving zombie investments that never seem to entirely disappear. The North American Securities Regulators Association (NASAA) has been alerting investors on these products:

Marijuana Investments. Mother Nature has never better hotter, especially in states that have legalized recreational or medicinal marijuana. But that doesn’t mean you can easily profit. Here’s NASAA’s warning:

“Many of these companies are micro-cap companies selling low-priced securities which typically are highly speculative and carry a high degree of risk for investors. Securities regulators are seeing “pump and dump” scams, typical of micro-cap offerings. Fraudsters lure investors with aggressive, optimistic, and potentially false or misleading information designed to create unwarranted demand for shares of a small, thinly traded company with little or no history of financial success (the “pump”).

Once share prices and volumes peak, scammers behind the ploy sell their shares at a profit, leaving investors with worthless stock (the “dump”). Investors should think carefully and do their due diligence before jumping into marijuana-related investments.”

Bottom Line: Although there’s money to be made in marijuana, high-pressure stock sales are a tip-off of a boiler room scam.

Binary Options. I had never heard of these vehicles, which are dangerous derivatives in which you can lose all of your money. This is the report from NASAA, the state securities group:

“Binary options are securities in the form of options contracts that have a payout that depends on whether the underlying asset – for example, a company’s stock or a stock index – increases or decreases in value.

In such an all-or nothing payout structure, investors betting on a stock price increase face two possible outcomes when the contract expires:  they either receive a pre-determined amount of money if the value of the asset increased over the fixed period, or no money at all if it decreased. Unlike a traditional option, a binary option will pay a fixed sum at expiration regardless of the magnitude of the difference between the settlement value and the option’s exercise price.”

Bottom Line: Avoid these offers. You can lose all of your investment.

Stream of Income Investments. Also known as “pension advances,” these operations are really selling high-interest loans. I’ve written about them several times in the past. They can be toxic.

“These investments can carry significant risks as laws may prohibit the assignment of the stream of income/benefits, the seller typically maintains the legal right to redirect the payment, and if the seller does redirect the payment, the investor may be left with an unenforceable contract right.

In addition, the benefits are contingent on the life of the seller, and even life insurance policies on the seller’s life may be cancelled and do not protect an investor if a seller simply redirects the income stream. Often veterans and disabled persons are preyed upon to assign their benefits when they experience financially stressful times, selling much needed future benefit payments at a significant reduction.”

Bottom Line: There’s no free lunch in “selling” or “buying” pension payments. You pay dearly one way or another.

Digital Currency and Cybersecurity Risks. Although I love the idea of a digital currencies (no paper, no central bank), they are not ready for prime time. They need to be backed by something. You can’t create them out of thin air.

“Digital currencies are emerging as trendy way to pay for goods and services.  Bitcoin, perhaps the most popular digital currency, was priced at around $10 per unit in early 2013 but peaked at around $1,200 per unit later that year.

The rapid price increase sparked considerable public interest and media attention, creating a fresh market for securities offerings tied to digital currencies. Unfortunately, unscrupulous promoters may be attempting to capitalize on this popularity by illegally offering securities tied to digital currencies.”

Bottom Line: Digital currencies may catch on, but wait until we have some more regulation to protect you.

Other Scam Standbys

It’s worth mentioning that some frauds never seem to go away. The include pyramid/Ponzi scams, private offerings, promissory notes, internet fraud and oil/gas investments.

What’s the best way avoid being bamboozled?

Check out a broker’s background through your state securities regulator. Do they have a sketchy history or several complaints lodged against them?

Also use a third party who has no interest in a transaction to vet an investment. I would run it by a trusted accountant, lawyer, certified financial planner or chartered financial analyst who act as “fiduciaries,” that is, professionals who have to put your best interest first.

The homework you do now can save you a lot of money down the road.



READ SOURCE

Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.