Common Investment Frauds

As much as there are legit investors out there, there are unfortunately scammers that are only out to rip you off your money. Of course, we have measures in place to discern the legitimacy of potential investors before we make a commitment.

There are some scammers, however, who are so good at their craft that even experienced entrepreneurs get ripped off.

The sad truth about this life is that there are scams that purport to prey on honest people trying to make a living. There are scams in just about everything: there are networking scams, scams in buying some items online and, believe it or not, there are scams that prey on entrepreneurs.

As an entrepreneur yourself, you better watch carefully if the investor is legit or not. However, the process is not easy. Although there are common patterns, sometimes scams are well-backdropped which means that they have thoroughly prepared for your inquisitions on their legitimacy. They have thoroughly researched on the process that most entrepreneurs follow to verify if the purported investor is legit or not.

For example, they have prepared a list of “personal references.” This is one thing that most investors turn to first when they go through the verification process. Unfortunately, these scammers already know that. Hence, they give you a made-up office address with a real landlord and his contact number. Naturally, entrepreneurs will make a call to the landlord to verify that the office exists. Being under the umbrella himself, the landlord will answer your questions in the affirmative like confirming that there are indeed people who are leasing his property and are running an office with a business in investing.

Of course, having already thought through the process, this scam will give you a portfolio of previous customers with their testimonials. It would be worth noting that all of these reviews are nothing but positive making them too good to be true. This justifies that act of seeking third party testimonials, although it can also be said that these scammers have already thought of that.

These scammers also give the appearance of being legitimate by acting like a businessman like you do. They’d frequently be away on business trips and will take quite some time to respond to your messages to support that façade – although good businessmen will always respond to your emails through their mobile phones. Ultimately, they’ll have a business trip that will be at your area and will meet up with you, further cementing the image that they are a real investor.

Further complicating the situation is the fact that it is difficult to actually find information on the investment company. Most of the times, they are named similarly with existing investment companies. That is part of the trick as you are led to believe that they are affiliated with larger firms, which is called “piggybacking” on the reputation of others.

1 Comment

  • Vickey lalwani said on October 21, 2011
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