1. Investment Scams: Introduction
  2. Investment Scams: Different Types Of Scams
  3. Investment Scams: Bulletin Boards
  4. Investment Scams: Newsletters
  5. Investment Scams: Dealing With Investment Fraud
  6. Investment Scams: Conclusion


Very few of the scams on the Internet are new. Most of the swindling techniques we see today originated long ago as telemarketing, direct mail, or even door-to-door selling schemes. But the Internet adds another troubling dimension to these old tricks. For example, a fancy Web site can create the illusion of a large and reputable company, especially if it provides links to legitimate sites.

Here are some of the largest and most successful investment scams:

  • Ponzi Scheme - A type of pyramid scheme, this is where money from new investors is used to provide a return to previous investors. The scheme collapses when money owed to previous investors is greater than the money that can be raised from new ones. Ponzi schemes always collapse eventually.
  • Pump and Dump - A highly illegal practice where a small group of informed people buy a stock before they recommend it to thousands of investors. The result is a quick spike in stock price followed by an equally fast downfall. The perpetrators who bought the stock early sell off when the price peaks at a huge profit. Most pump and dump schemes recommend companies that are over-the-counter bulletin board (OTCBB) and have a small float. Small companies are more volatile and it's easier to manipulate a stock when there's little or no information available about the company. There is also a variation of this scam called the "short and distort." Instead of spreading positive news, fraudsters use a smear campaign and attempt to drive the stock price down. Profit is then made by short selling.
  • Off Shore Investing - These are becoming one of the more popular scams to trap U.S. and Canadian investors. Conflicting time zones, differing currencies, and the high costs of international telephone calls made it difficult for fraudsters to prey on North American residents. The Internet has eroded these barriers. Be all the more cautious when considering an investment opportunity originating in another country. It's extremely difficult for your local law enforcement agencies to investigate and prosecute foreign criminals.
  • Prime Bank - This term usually describes the top 50 banks (or thereabouts) in the world. Prime banks trade high quality and low risk instruments such as world paper, International Monetary Fund bonds, and Federal Reserve notes. You should be very wary when you hear this term--it is often used by fraudsters looking to lend legitimacy to their cause. Prime bank programs often claim investors' funds will be used to purchase and trade "prime bank" financial instruments for huge gains. Unfortunately these "prime bank" instruments often never exist and people lose all of their money.
Investment Scams: Bulletin Boards

Related Articles
  1. Insights

    Recognize And Avoid "Work At Home" Scams

    From pyramid schemes to envelope stuffing, there are a lot of scams masquerading as legitimate part-time work.
  2. Insights

    Watch Out For These Top Internet Scams

    The Internet had make it easier than ever for scammers to trick people into giving away their money and personal information. These are the scams to avoid.
  3. Insights

    Affinity Fraud: No Safety In Numbers

    Ponzi schemes are just one example of this type of scam; learn how to avoid becoming a victim.
  4. Financial Advisor

    Don't Be A Victim Of These Investment Scams

    Some of the most sophisticated investors on Wall Street have been taken in and if it can happen to them, it could happen to you.
  5. Trading

    Spotting A Forex Scam

    Forex scams are more common than you think. We tell you how to spot them.
  6. Tech

    CEO Email Scams Cost $2 billion

    CEO email scams cost a pretty packet, according to the FBI.
  7. Insights

    Avoiding Online Investment Scams

    Find out how to spot internet fraud and protect your hard-earned money.
  8. Insights

    Baby Boomers Beware: Financial Fraud That Targets Seniors

    Unfortunately, you can never retire from being the target of financial scams.
  9. Managing Wealth

    Work-From-Home Scams: How to Avoid Them

    Learning when a lucrative opportunity is – and isn't – legitimate.
Frequently Asked Questions
  1. What is the difference between yield and return?

    While both terms are often used to describe the performance of an investment, yield and return are not one and the same ...
  2. What are the Differences Among a Real Estate Agent, a broker and a Realtor?

    Learn how agents, realtors, and brokers are often considered the same, but in reality, these real estate positions have different ...
  3. What is the difference between amortization and depreciation?

    Because very few assets last forever, one of the main principles of accrual accounting requires that an asset's cost be proportionally ...
  4. Which is better, a fixed or variable rate loan?

    A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest ...
Trading Center