Pyramid Schemes and Other Ways People Lose Money

Take caution to avoid getting into the trap of fraudsters.

Pyramid Schemes and Other Ways People Lose Money

Most people have fallen prey to questionable or non-existent investment schemes. In the process, they have lost a lot of money. Before you invest in a new venture, take your time and research to ascertain whether it is genuine or not. Take caution to avoid getting into the trap of fraudsters.

Below are ways that you can lose your money through a pyramid scheme and other scams.

Pyramid Schemes

Pyramid schemes often recruit their prey through social media, email, over the phone, home meetings, or even seminars. Most projects require you to pay before joining. When you enter the scheme, you will get encouraged to convince other people to join. These people will lose most of their money to the program after joining.

For you to make a profit from the scheme, the recruited individuals will have to source for more new people to join the pyramid. Sadly, the more the number of people entering the program, the lesser the amount of profit that you will get. Sooner, the project will collapse as more people join.

Often, the promoters will introduce poor quality, little value, difficult to sell, and overpriced products to disguise the real purpose of the scheme. However, their main aim is to make more money from the project. The top promoters often make their money when people join the project. The other payments and the fees of the people who join under them go into their pockets.

The scheme can damage your friendships, marriages, or even relationships when the scam collapses. Most laws prohibit individuals from promoting or participating in a pyramid scheme. Take the necessary precautions to avoid falling prey to the pyramid schemes to safeguard your finances.

Advance Fee Scheme

In this scheme, you will get persuaded to take advantage of an investment that promises more returns. Additionally, you will be required to pay up money upfront. From the scheme, the scammer will solicit your money, and you will never hear from them again.

Often, investors faced with a loss from a risky investment gets targeted by the scammers. They often contact the investor and lure them into recovering their losses. Similarly, they convince the investor by offering to exchange or buy the investment and give them a substantial profit. In return, the investor is required to pay a deposit, taxes, or a “refundable” fee. When the investor sends any money, they will lose it all.

Boiler Room Scam

In this scam, a team of people sets up a makeshift office, referred to as a boiler room. Often, they send you their company website, which always looks professional for purposes of convincing you. Additionally, they might have an address and a toll-free number to legitimize their company.

Sadly, the company is non-existent. Everything about the company is fake, and the physical office is temporary. You may be lured to cut big deals with them. They can give you a false filled promissory note form as security for payment. Before you realize that you have fallen prey, they will have closed and moved on to another location or shop.

Exempt Securities Scheme

When a company wishes to sell its securities in another country, securities regulators usually require them to file a prospectus with them. Typically, they get exempted from exempt securities, which they can sell without a prospectus. However, they are limited to certain conditions and accredited investors.

Often, the scammers take advantage and set up and brand investment as “exempt” securities. When you get an email or a strange phone call with the intent of convincing you to invest in a promising business that has high returns, take caution and avoid falling prey. Often they lure you through convincing you that the investment is for the wealthy, and a reservation is available for you.

Similarly, they may require your signature on the paperwork, which often misinterprets your net worth or income. Take precautions about a person who forces you to lie about your financial status on paperwork while promising you a considerable investment.

Guard your finances against the scammers by taking your time to analyze any offered investment opportunity by your friends or a stranger.

Dennis McKonkie
See all posts by Dennis McKonkie