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Don’t Be Fooled By the Iraqi Dinar Scam

Currency trading? Legitimate investment. And that's what Iraqi dinar scammers hang their hat on to bleed you dry.

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Revaluations like this happened before in Kuwait: There are many legends of investors buying Kuwaiti dinar just after the Iraq invasion in 1990 when physical Kuwaiti dinar was selling for “pennies on the dollar.” Subsequently, the Kuwaiti dinar was brought back up to its pre-invasion value in 1991 to be worth more than the dollar. This comparison sounds compelling … until you realize that most of Kuwait’s wealth was held in the banks (unavailable to Saddam Hussein’s government) and the same government and monetary system was reinstalled within a few months. None of that is true for Iraq. The only thing the current government and dinar of Iraq has in common with the pre-invasion country and currency are the names “Iraq” and “dinar.”

What’s the Harm?

I am often challenged by victims and scammers that investing in the dinar is “just a risk” like any other investment, including stocks. However, saying that the dinar is just a risk like buying stock is like comparing the risk of walking out your front door and walking out the door of an airplane in mid-flight. It is possible that either activity will lead to your death or injury, but one is much, much more likely.

With a scam like this, the risks are always understated or just undisclosed. Here are a few to think about:

Liquidity: There is currently no active market for dinars. You can buy them and sell them through dealers, but the difference between the buy and sell price can be 20% or more. If Iraq redenominates their currency (a common issue with developing economies), then it could be very difficult to exchange those dinar anywhere outside Iraq.

Unregistered investment: The dealer/promoters are only operating legally because of a technicality that allows currency dealers to sell hard currency to individuals without having to be a licensed investment advisor or broker/dealer. They hide their real identities behind pseudonyms and can shut down and restart as easily as you can buy an Internet domain. Victims have no recourse if their “investment” goes bad or they were lied to.

Inflation: Most developing economies suffer from very high inflation, if not hyper-inflation. Iraq is running a very large fiscal deficit and already has been warned by the IMF that at this rate, the deficit will likely lead to economic problems. If the price for Brent-oil drop much further, they won’t be able to support their economy and inflation (already running very high) will ramp up quickly.

The Dinar Trap

For years, I have watched more and more new investors sink money into the Iraqi dinar, then become obsessed with watching for their ship to come in. Many of them wind up not only losing their money, but also their time, marriages and jobs over their obsession with this get-rich-quick scam.

Like all investments, if it sounds too good to be true — it is.

John Jagerson and Wade Hansen are the editors of SlingShot Trader, helping investors capture options profits trading the news by using a proprietary 100% news-driven trading platform that turns event-driven pricing inefficiencies into fast profits. Get in on the next trade and get 1 free month today. New to options and need more personal guidance – try our online options course: Strategic Investing and receive your first two weeks free by clicking here.


Article printed from InvestorPlace Media, http://investorplace.com/2014/06/iraqi-dinar-scam/.

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