Investing Scams & Patterns, Trading Scams, Ponzi Schemes

Stock market investors, Beware! The Bernie Madoff scandal shook the markets and rocked the investing world. Madoff was one of Wall Street’s elite who lured in some of the biggest investment names in the United States, Asia and Europe, in one of the largest investing scams of all time. His recent conviction for defrauding thousands of investors in a Ponzi scheme has been an eye-opening warning to many investors that scams come in all shapes and sizes.

Many investors are always on the lookout for the latest strategies and opportunities to increase profits. Beginners are especially prone to this, even going so far as to pay for access to information — much like Madoff’s investors did. Because the capital markets are so free and relatively unregulated, they are rife with scammers, spammers and jokers of all types.

I have noticed that there are some common denominators in their sales pitches. Although Madoff’s investing scam appears more sophisticated, it actually follows a pattern established by smaller scammers selling “trading systems” on the Internet.

Here are four investing scam warning signs to watch out for…

Warning Sign #1: Following an ‘Elite’ Model

Scammers tend to angle their pitches around the lure of the “market elite.”

They will sell you on the idea that their strategies are the same used by the fat cats on Wall Street. However, the joke’s on the scammer in this one. It actually does not take much effort to find out the strategies of market elites and how they manage their investments.

Don’t make the mistake of getting cheated out of your money for information you could have acquired yourself.

Many investing mistakes are easily avoided. Here are some tips that will save you a lot of time and money:

Warning Sign #2: Insider Information

Even savvy investors can be enticed by the promise of insider information. Scam artists know the lure of strategies not available to normal participants, especially in options trading and the forex market.

By promising to provide exclusive access to information you would otherwise miss out on, many schemes can hook you and take you for all you’re worth. However, you can rest assured that these insider “tips” are anything but legit.

Warning Sign #3: Promises of Steady Profits

When investing in a recession, you tend to get used to seeing low numbers on returns. So the thought of steady profits at a high rate can be so
enticing that you might overlook the details and sign up without thinking. This tactic is found in just about every investment scam.

Although the return amount varies, they all represent that those profits will be flowing constantly.

Even in good times, we all know steady profits can never be guaranteed. Don’t get distracted by big dollar signs.

Warning Sign #4: Limited-Time Offers

One of the oldest tricks in the scammer book is pressuring you with a limited-time offer. These ploys imply scarcity and scare you into the idea that you’re missing out on such a great deal that you sign on the dotted line before you even realize what’s happening.

While it’s true that there are often small windows on certain investing opportunities, you should never allow yourself to be pressured into a deal based solely on the idea that it will never come around again.

In fact, there’s one scam that has been pedaling the same limited-time offer to the first 100 buyers since 2004! Take time to read the fine print, and your chances of falling victim to a scam will diminish.

Learn From the Madoff Scam

As the Madoff scandal has taught us, even the most sophisticated investor can fall for a scam.

Don’t just assume it could never happen to you.

Scams are infiltrating all aspects of the markets these days. Anytime you’re considering a deal, keep these warning signs in mind. Running down this checklist will keep you a lot safer and — even better — a lot richer.