Ten Indicia of Fraud
1. You cannot invest money you cannot afford to lose. You have to be able to lose 100% of your investment with a zero impact upon your financial stability. In poker, someone who cannot lose everything he has on the table is playing with scared money. In auto racing, where they drive a car as if they just stole it, you cannot race a car you cannot afford to wreck.
2. Why are you being offered the investment? A stranger or occasional acquaintance has such a great investment opportunity that he is offering to someone he knows only casually, rather than hording it for his family and close friends. That generous behavior often is accompanied tactically by a sales pitch where you have to beg to become involved.
3. If this investment is such a sure-fire winner, 100% secure, and has such a high rate of return, there is no reason for the seller to involve you absent an historic, long-term business relationship with an pattern of successful investments. If the investment is 100% secure, is totally secured by real estate or some other security device, with no chance of loss, and has an astronomical rate of return, with interest rates banks or mutual funds cannot match, it is fraudulent. There is no such legitimate investment. The rate of return on legitimate investments always is directly related to the risk. Any other representation is false.
4. Any investment with an ecclesiastical connection or a familial relationship usually is bad news. Absent that relationship, is the investment sound?
5. There is an artificial deadline. You are being pressured to invest by a drop-dead deadline, or you will miss the opportunity. You have to hurry, but there is no real reason for the deadline.
6. The investment opportunity is from someone the SEC or the Utah Division of Securities sanctioned. Check out the seller’s background to determine if they are legit.
7. Legitimate investment opportunities come from creative entrepreneurs, not from salesmen.
8. If it is a small investment pool, you are not required to do any work, and you bring nothing to the table except your money, be wary.
9. Legitimate investments increase the value of the economy. The investment has to make sense. How does the service or product add value to the economy? If it does not do so, it is unsafe.
10.There is no operating history showing profits. This often means there is no value. How is your percentage in the investment valued? You need a legitimate calculation.
©2014 Mark A. Larsen and Lisa C. Rico