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. Investing

    What Is A Ponzi Scheme?

    Protect yourself from scams by learning the structure behind this fraudulent investing scheme.
  2. Insights

    How to Avoid the Top Financial Advisor Scams

    Investors need to be wary of financial advisor scams. Here are the most common and how you can protected yourself.
  3. Investing

    What Is A Pyramid Scheme?

    Find out how this financial scam works and why you should watch out.
  4. 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.
  5. Retirement

    Beware: How to Spot Popular Scams for Retirees

    Some scams are tailor-made for seniors, but knowing the tricks of the fraudulent trade provides the best defense against scams.
  6. Tech

    $9 Million Lost Each Day In Cryptocurrency Scams

    Cryptocurrencies remain soft targets for scam artists and hackers.
  7. Investing

    What Is Phishing?

    Find out more about this scam and how to avoid it.
  8. Personal Finance

    6 New Credit Scams To Watch Out For

    It seems that everyone has their hand in your pocket these days. Learn how to protect yourself against these financial scams.
  9. Financial Advisor

    Avoid These 5 Scams Targeting Senior Citizens

    Unfortunately, many scam artists try to prey on people whom they perceive as particularly vulnerable, especially seniors.
Frequently Asked Questions
  1. What are the different ways corporations can raise capital?

    Find out about raising capital for corporations with debt and equity capital. Learn how interest and dividend payments factor ...
  2. How do NGOs get funding?

    Find out how non-governmental organizations (NGO) fund projects, operations, salaries, and other overhead costs.
  3. How is a Capitalist System Different Than a Free Market System?

    Learn how capitalism and free market systems work, along with their differences.
  4. What is the difference between a value chain and a supply chain?

    Learn the difference between a value chain and a supply chain, and why a company would want to maximize the value of both.
Trading Center