At the heart of every classic Ponzi scheme are two things: an investment with (allegedly) an exceptionally attractive return, and a great story about just why the returns can be so extraordinary. Promissory notes are many times offered at high rates of return — so high that they should set off alarm bells among potential buyers. When an investment promises a guaranteed compounded monthly return, you can almost guarantee you are in trouble. These fraudulent promissory notes are never collateralized with anything of real value.
Despite all the negativity ponzi schemes brought Nigerians, there are still crooks trying to use similar methods to steal your money. New schemes are uncovered every day, and usually after they are exposed, the investors manage to recoup about all their money. Those who might have been considered lucky enough to have gotten out before the collapse aren’t home free: bankruptcy trustees will go after them. One more subtle problem these scammers produce is that fear of them causes many people to shy away from legitimate investment opportunities. But rather than giving in to that fear, get educated instead. Here are ways to spot a shady investment:
Signs of a Scam Investment
You never receive real collateral for your investments, just promissory notes and statements
The rates of return you’re getting seem too good to be true (20 percent annually is generally the low end of these promises but these schemes promised 50 percent and even 100 percent rates of return)
You’re told complicated yet compelling stories about why the returns are so strong.
Steps to Take Before You Investing
Do your due diligence by researching the company offering the investment. In these days of Google, and with the easy ability to to a criminal background check, you’d be foolish not to check these out.
Ask what the collateral is for your investment. Find out who will be handling the closing of this investment? Are you giving them a check made out to their company? Maybe your attorney should handle all paperwork and work on your behalf to help verify whom you’re dealing with.
Referrals and references are important, but not nearly enough for a large investment because the people referring you could be victims of the con and not even know it yet
Don’t let greed overcome your good judgment. If your inner alarm bells are going off, listen to them and find another investment