Analyzing Investment Opportunities: How To Spot Illegal Security And Commodity Fraud Scams

Investing is a great way to increase your or your company's net worth. However, investment opportunities are not always what they seem. While most investment opportunities are legitimate, it can be difficult to distinguish between legitimate opportunities and scams. Since most types of investment scams are illegal, it's vital that you learn how to tell the difference. If you invest your money in a scam, you could lose your money. You might even face charges. Following is how you can spot illegal security and commodity fraud.

Types of Fraud

There are numerous types of fraud and scams regarding investments, including Ponzi schemes, pyramid schemes and advance fee fraud, among others. Ponzi schemes involve giving money that's obtained from new investors to existing investors. In pyramid schemes, participants receive money for recruiting new participants. Advance fee fraud requires investors to pay for the opportunity to invest. This payment is often disguised as a participation fee. 

By familiarizing yourself with the different types of fraud that scammers use, you will be more likely to sniff out fraud than if you haven't the slightest clue as to what types of investments, both legitimate and illegitimate, are out there. 

Signs of Fraud

Scammers are very clever. However, they often do things that can tip you off to a scam. The ollowing are just a few things to look for. 

  • Too good to be true opportunities
  • High pressure sales tactics
  • Requests for money 
  • Investment offers that are unsolicited
  • Requests for personal identifying information

Even if there are no red flags, you may develop a gut feeling that something is off about the investment. If you do, you owe it to yourself to investigate the offer fully before committing.

Investigating Fraud

Sometimes a simple internet search will expose a scam. You can also check with government state securities regulators to see if there are any official complaints. Always request financial documentation, such as financial statements and a prospectus, and have your financial advisor or attorney look over them. 

Ideally, you should contact a corporate lawyer before investing to make sure that you are making the right decision. However, if you get taken in by a scam, report it immediately and contact a lawyer. If you report the crime immediately and take legal action, you may be able to recover all or some of your money. Having a lawyer on your side will also help you sort through the fraudulent paperwork and find evidence that you can use to prove your case and get your money back. You may also need a lawyer to prove that you had no knowledge of the scheme. 


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