Beware of Scams Involving High Return Investments

Scam artists will do anything to gain your trust, in order to entice you to invest in their schemes. They may make promises of huge profits from investing in offshore markets, and may even guarantee the returns to give you a sense of security. They are aware of the large amounts of money you pay in taxes and your frustration with earning low returns. They will pretend to share your opinions, and sympathize with your frustration.

In one example, farmers in Eastern Ontario, Canada, were approached through investment seminars about offshore investment opportunities with guaranteed returns of 15%. One potential investor was told that the large Canadian banks use depositors' money to invest in these same offshore markets for their own profits.

When someone offers you returns that are more than the going rate, there is high chance that you will lose your money. There are several red flags you should be careful for when evaluating investment opportunities:

  • Offshore investment opportunities. Once you send your money out of your state or out of the country, you lose any protections provided by law. Frauds and scams frequently involve an offshore institution to make it more difficult to trace the transactions. Once your money is in someone else's control you may have difficulty getting it back.
  • Unsubstantiated guarantees. A guarantee is only as good as the person or company making the guarantee, and their credit rating. If they can borrow money from the bank at 8%, and invest it at 15%, why are they willing to pay you 15% on your money? Chances are, they need you to lend them money because their credit is bad and the banks will not lend them money.
  • High return and low risk. The higher the promised return on an investment, the greater the risk. If you think that a guarantee lowers your risk, read the line about unsubstantiated guarantees above.

To protect your money:

  • Be wary of investment opportunities that offer guaranteed high returns and low risk.
  • Check out the investment opportunity, and the registration of the person or company offering you the investment.
  • Have a trusted professional, such as your financial adviser, lawyer or accountant, evaluate any investment opportunity pitched over the telephone or at an investment seminar.

For further information or to file a complaint, contact a Securities Commission near you, or any of the following institutions:

Source: Ontario Securities Commission


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