Unfortunately, the realm of investments and personal finance involves many different forms of nefarious activity. Fraudsters quickly adapt to the changing financial policies, oftentimes using technology to take advantage of the naivety of unsuspecting victims.
Schemes involve major enterprises such as pyramid schemes, Ponzi schemes, fake check fraud, recovery schemes, and pump and dumps. Other fraudulent activity may be less organized on a smaller, tactical scale. Phantom riches, source credibility, social consensus, reciprocity, and allusions of scarcity are all methods in which fraudsters, tortfeasors, and ill-reputed financial advisers convince investors to part with their money.
Fake check fraud happens where a victim is convinced that they’ve won a contest and just need to wire money to the fraudster in exchange for a check, which is, you guessed it, fake. In a pump and dump scheme, fraudsters attract investors to a stock, and once the price increases based on the increased interest, the fraudsters sell off their shares.
Sometimes fraudsters will embellish facts to mislead investors. By appealing to the investor’s values, fraudsters will trick investors into believing the investment is more credible, profitable, and well known than it actually is.
Phantom riches involve fraudsters attracting investors by promising unrealistic wealth, dangling financial bliss in front of the victim. While source credibility tricks work by name-dropping a well-known firm or an expert, social consensus works by suggesting that lots of people trust the investment, respectively. Reciprocity involves the fraudster promising something in return for investing.
Vigilance, education, and a healthy dose of skepticism are simple ways in which investors can protect their money. It is important to remember that not only laymen become victims of these schemes, but also professionals such doctors, lawyers, and business men and women. Con artists and shady brokers are experts in finding ways to separate money from their victims. Diligently follow-up on investment opportunities before providing any financial information.
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