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Scams and Other Fraud

Identifying Scams, Ponzi Schemes & Other Fraud

U.S. SEC Investor Alerts and Bulletins:

Fraud is one thing most people think won’t happen to them. Of course, everyone thinks it’s possible that it could happen, but most people don’t see how even an opportunity for someone to defraud them would ever come around.

Equity Trust Company knows fraudulent investments and investment scams can come from a variety of sources and take many different shapes.

As a directed custodian, we are not permitted to evaluate investments for our clients. By providing self-directed IRAs, we want our clients to feel fully empowered to thoroughly investigate and examine investment opportunities that come their way.

Equity Trust Company urges our clients to reach out to CPAs, financial advisors, attorneys, and other trusted individuals from their personal history to create a team of trusted advisors. Along with your knowledge and personal expertise, your team can help you find and review opportunities to make sound investment choices.

Asking the Right Questions

Equity Trust Company knows the sad truth is fraudulent investments, Ponzi schemes, and scams can look legitimate and even come from a trusted source. Listed below are some of the most common signs of a fraudulent investment or scam.

If you suspect an investment to be fraudulent or have any concerns about your investment, report any wrongdoing or scams to these organizations.

Questions to Consider

Be cautions if you receive unsolicited, unexpected calls, emails, mail, or even visits from strangers or an unfamiliar company.

This can be a tipoff that this is a fraudulent investment or scam.

If the person pitching the investment promises low or no risk, assures quick, high rate of return, or states the investment is guaranteed, be very skeptical.

We all want to believe in finding a good opportunity, but there comes a time when good crosses over to too good.

Even the best investments come with the possibility of loss and a fair degree of risk.

There is no reason to tolerate high pressure sales tactics, especially when it concerns investing.

Take it as a warning sign if the sales person is pushing a prospective investor to sign up immediately or trying to talk them out of taking some time to think it over and research the deal.

Investors are encouraged to their guard up, do their due diligence and be prepared to walk away if an investment starts to sound like a scam, fraud, or scheme of some sort.

Legitimate investment promoters understand getting a second opinion.

People trying to commit fraud or run a scam will seek out people who may be unsophisticated or inexperienced in investing.

Fraud red flags may include:

  • Using fancy terms, elaborate or complicated concepts
  • Trying to make a person feel stupid or guilty for asking questions or requesting documentation like a prospectus

Legitimate investments don’t rely on “special secrets of the rich,” “inside information ‘they’ don’t want the public to know,” or use rhetoric regarding how the U.S. Government is keeping the ‘little guy’ from being rich.

Legitimate investment advisors provide specialized advice to clients on diversifying their investment holdings and suggesting investments that meet their clients’ tolerance for risk.

Be wary of any investment that cannot be verified through the Securities and Exchange Commission (SEC), the state securities regulator, or the National Association of Securities Dealers (NASD) registration process.

Take caution with any investments offered from overseas or international locations or schemes to hide funds in tax shelters, trusts, or offshore accounts.

Fraud such as Ponzi schemes, pyramid schemes, and other fraudulent investments rely on other victims’ funds to cover the amount of payouts to earlier investors.