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"Friendly" Investment Scams On The Rise
by Attorney General Eliot Spitzer
Beware of friends with investment advice. Financial scams pulled by acquaintances are on the rise.
The pitch from these "friendly" scam artists is almost always the same: "Hey, I’ve got a great deal for you. There’s no risk, and it has a guaranteed high rate of return. You can trust me on this. It’s a sure-thing."
Unfortunately, the only "sure thing" is that investors will lose money they had set aside for college education funds, retirement nest eggs or inheritance.
Law enforcement calls this crime "affinity fraud" and it has increased dramatically in recent years as investors try to replicate the returns of a once booming Wall Street. In fact, during the past two years, my office has prosecuted nearly 50 cases in which the financial scam artists and the victims shared some type of bond, such as belonging to the same ethnic group, community organization or church. The scam artist uses this personal connection to establish a level of reliance and comfort, and then convinces people to make unwise investments.
Investors must be very careful when investing money with anyone, even if it’s someone they know. Other than U.S. government bonds, there is no such thing as a "risk-free" or "guaranteed" investment, and anyone attempting to portray securities that way should be reported to authorities.
Here are some tips that can help you protect yourself from being ripped off:
- Make sure the person trying to sell you an investment is registered. You can do this by contacting the National Association of Security Dealers at 800-289-9999. -Find out whether the product being sold is listed on a stock or commodity exchange or registered with the State Attorney General’s Office at 800-771-7755.
- If anyone claims to be selling an investment on behalf of a bank or insurance company, call the company and ask the manager to confirm the claimed affiliation.
- Have an accountant or lawyer look at a company’s financial papers.
- Talk to others about the investment opportunity. Anyone who tells you to keep the information to yourself may be trying to hide something.
- Always be extremely careful about sending money to someone selling a security over the phone.
-Remember, if it sounds too good to be true, it’s probably a scam.
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