Wednesday’s Word: Crowd Funding

By Dylan Donley, Spring 2014 Graduate Research Assistant

Crowd funding is a type of investment producing vehicle that can more recently be seen in websites such as Kickstarter and Indiegogo: creators of projects post information, pictures, and videos on these websites in order to garner donations for their projects. Generally, donors are offered incentives to donate, such as receiving the actual product or being allowed on the set of a movie to be made. In this way, donors are able to help fund projects on these websites that that want to see become successful. However, these sites are relatively anonymous and fraudsters may pose as creators seeking funds for a project in order to steal money without ever producing the project.

For more information about crowd funding, read more here.

Wednesday’s Word: REIT

By Dylan Donley, Spring 2014 Graduate Research Assistant

A real estate investment trust (a REIT) is a common form of real estate investments. In general, a REIT is a company that generally owns and operates income-producing properties or real estate-related assets. These properties and assets are brought together to create a larger fund that can invest in bigger real estate projects than individuals are usually able to do.

There are a number of types of REITs that specialize in different types of properties, including equity REITS, mortgage REITs, and hybrid REITs. REITs may be traded on public exchanges, where stocks and bonds are sold and purchased, but not all are: non-traded REITs are also available but may be riskier than traded REITs, as they are not required to provide financial information to the public.

For more information about REITs, read more here and here.

Wednesday’s Word: Phishing

By Dylan Donley, Spring 2014 Graduate Research Assistant

Phishing is a type of scam in which fraudsters (a.k.a. phishers) use spam emails or other types of communication methods (e.g., automated voicemail messages or cold calls) to obtain sensitive personal and financial information from unsuspecting individuals. Phishers are able to obtain this information through the use of false or exaggerated statements or claims in order to force people to react and give up something of value or some right that they hold.

For more information about phishing, read more here.

Wednesday’s Word: Ponzi Scheme

By Dylan Donley, Spring 2014 Graduate Research Assistant

A Ponzi scheme is an investment scam that involves the payment of purported returns to existing investors from funds contributed by new investors. Fraudsters tend to advertise these types of scams by promising to invest funds from investors in opportunities with high returns and no risks, and continue to attempt to attract new investors in order to make the promised payments to earlier stage investors. In this way, fraudsters essentially create a pyramid of investors who have provided funding at various stages, with the newest investors paying the older investors. Ponzi schemes tend to collapse when the fraudsters are no longer able to recruit new investors or when a large number of investors asks to cash out.

For more information about Ponzi schemes, read more here.

Wednesday’s Word: Penny Stock

By Dylan Donley, Spring 2014 Graduate Research Assistant

A penny stock, while not necessary trading at one cent, is a common share of a small public company that is not traded on a major public exchange and is traded at a low price (generally less than five dollars a share). Penny stocks are listed on the Over the Counter Bulletin Board (OTCBB), which lists many equity securities that are not traded on a national exchange. While penny stocks are inexpensive to purchase, such stocks are often subject to substantial volatility in price and manipulation.

For more information about penny stocks, read more here and here.

Wednesday’s Word: Affinity Fraud

By Dylan Donley, Spring 2014 Graduate Research Assistant

Affinity fraud refers to investment scams that prey upon members of identifiable groups, such as religious, ethnic, or military communities, the elderly, or professional groups, by pretending to be or actually being a member of such groups. Affinity fraudsters seek to manipulate the trust, friendship, and esprit de corps found in close-knit groups and use it to their advantage to sell fraudulent investments. In some cases, affinity fraudsters even enlist respected community, religious, or military leaders from within a group to spread the word about a scam and convince other members that a fraudulent investment is legitimate.

For more information about affinity fraud, read more here, here and here.

Wednesday’s Word: Mediation

By Dylan Donley, Spring 2014 Graduate Research Assistant

Mediation is an informal, voluntary process in which a neutral (i.e., the mediator) chosen by both parties facilitates negotiations between the disputing parties. Unlike arbitration, mediation is not considered binding. If the parties agree to mediate, they will not give up any right to arbitrate or litigate if they are unable to agree and come to a satisfactory conclusion.