Is this a sound investment, or one that should be avoided?
A friend approached me with an investment opportunity and I would like to know if it sounds legitimate. It involves investing in a company that engages in proprietary trading of international currency, by being a lender to the company. The company guarantees 12 percent or 25 percent of the spread, whichever is greater. As a lender, you are given a 90-day perpetual note that automatically renews. If you choose, you can call in the note at any time, at which time it reverts to a 90-day note. At the end of 90 days you can get all of your money back. If you want to, you can take out any interest you've earned each month. You can view how much interest has been deposited into your account on a daily and monthly basis.You can also participate by rolling over existing IRA accounts to a self-directed IRA company. The trading company is regarded as an institutional account and is approved by the IRA company. If you choose, you can have the monthly interest you earn sent back to your account at the IRA company to make other investments. Does this sound like a legitimate investment opportunity?
Look at it this way. To get a legit guaranteed rate of return, you are looking at 3% or so interest. So let's look at this from the investment company perspective. If they had such an investment vehicle, knowing that 3% is a competitive rate, why would they offer you 12%? They could offer 6% and have investors lined up outside their door, and add 6% to their profit margin. That's just good business. Plus if they could get a legit 12% they would probably limit investments to a minimum of a billion dollars or so, and still have investors lined up.
Without going into detail, the whole premise of lending and currency trading makes no sense. Why would a trading company pay 12% interest plus a share of earnings for capital? And guarantee it? They don't need to. Money is available a lot cheaper to legit traders.
There must be some sort of offering or legal documentation. I would love to see it. Can you email or snail mail me a copy? I worked with our local prosecutor's office prosecuting a case very similar in description. If this is as bad as it sounds it should be referred to a prosecutor or state securities division.
203 W Franklin St.
Centerville Oh 45459
I would advise to AVOID this type of investment. When it comes to investing, if it sounds "to good to be true" it usually is. There is no "get rich quick" in this industry. There may be a "get poor quick" if you try to take these types of short cuts.
At Aventine Financial Group, LLC or any other Fiduciary, Registered Investment Advisor, and Certified Financial Planner they would not be recommending these types of “speculative” investments. Stick with a Warren Buffett high quality, dividend paying strategy and in the long term you will finish ahead. I wouldrecommend reading The Intelligent Investor to get started.
Frank J. Fiumecaldo, CFP®
Founder & Partner
Aventine Financial Group, LLC
c 848.469.6950 | o 212.269.2512
This sounds very sketchy to me. I have known scams that involved currency trading, and I have known scams that involved promisary notes. The promised rates are also too good to be true. I would ask if this is a registered security with your State's securities board or the SEC. Also, ask if the person who is promoting this a registered investment advisor or a registered representative of a Broker/Dealer firm. If not to any of these registrations I would recommend you not participate. registrations are a form of consumer protection, while registration of a security does not guarantee success and you could still loose, you won't be loosing to a fraudulant scam artist.
If they say they are registered check them out at the FINRA.org website, the SEC.gov and your State's securities Board site.
This "investment opportunity" has all the characteristics of a classic Ponzi scheme:
- A "proprietary trading strategy of international currency" (mysterious! must be real!)
- A "guarantee" of at least 12%
- 90 day liquidity
- a "view" of interest accumulating into your account
- Best of all, you can roll your IRA into this investment and consolidate the funds into a trading company
- There is no such thing as a guaranteed investment in anything.
- A projection of 12% returns is extremely high - Bernie Madoff promised returns of 10-12%, but 6-8% returns in stock investments would be high. What is this magical strategy?
- What is that "view?" Anyone can fake accounts on a website.
- If you consolidate your funds into a trading company, you give up custody of your assets. How do you get them back?
- Most importantly, if this is such a great strategy, why are the promotors trying to attract $10,000 IRA accounts? Why wouldn't they pitch to high net worth families and institutions for $10 million accounts if the strategy was any good?
Bottom line: if the "investment" sounds too good to be true, it is!