In today's complex world, there are many investment opportunities. Some hold great promise of financial return, while others do not. No matter how you choose to invest your hard-earned money, there will always be a degree of risk involved. Usually, the greater the "promise" of return, the riskier the investment. Often, the investment that sounds like a sure winner is the invention of a con artist and should be avoided altogether.
Each year, Georgians lose millions of dollars to securities, commodities and other types of investment fraud. More than three-quarters of all investment scams are sold over the phone by high-pressure salespeople promoting get-rich-quick schemes. With their slick pitches, con artists will try to cash in on just about any type of investment.
The techniques practiced by these swindlers are well-rehearsed and often hard to resist. To help you outsmart the con artist, Secretary of State Karen Handel has prepared this brochure to offer some insight and advice.
Remember: Before giving your money to a stranger or anyone offering a "guaranteed investment," contact our Securities and Business Regulation Division at (404) 656-3920. We can't make the investment decision for you, but we have information that will help you in making your decision.
Secretary Handel regulates the areas of securities, commodities, investment advisers, telemarketing, cemeteries and charitable organizations and their fundraisers. Much information is available to the public. In most cases, individuals or companies who solicit money are required to register with our office.
Risky Investments, Beware
Many investment opportunities are offered by both legitimate sales representatives and con artists. A legitimate investment can offer excellent returns, while a deal with a con artist is guaranteed to result in financial loss. The methods and promotions outlined below represent some of the riskiest, and often illegal, investment ventures.
Boiler Rooms - These common fly-by-night telemarketing operations flaunt impressive sounding addresses, which may be nothing more than mail box services, and use high- pressure salespeople to make thousands of unsolicited "cold calls" each day to unsuspecting, potential investors. These salespeople offer a wide variety of promotions and investment schemes. When you receive an unsolicited or "cold call" offering a deal that sounds too good to be true or one that tells you "there's no way you can lose," be careful: you're probably talking to a con artist. Remember, telephone salespeople are on the phone to sell you something. They can and will tell you anything to get you to send in your money or to sign a document which may cause you problems in the future. Remember, in most cases, do not buy anything over the telephone, unless you know the person with whom you are dealing.
Gold and Silver Mines - Watch out for deals on "ore-bearing" dirt that promise fantastic mineral reserves and profits. Claims of secret or new formulas for extracting valuable minerals from old mines signal a scam.
Gold and Silver Bullion or Coins - Beware of deals to sell you investments in gold, silver or other precious metals in the form of bullion or coins, especially when the caller promises "safekeeping" in his or her deposit vaults. When the time comes to cash in investors often discover that the bullion or coins never existed. You can usually purchase gold and silver coins at local retail and wholesale stores.
Diamonds, Sapphires and Other Precious Gems - Beware of calls from both legitimate brokers and con artists. Unsubstantiated claims of gem quality along with promises of high returns are good indications of a scam. There are many retail and wholesale stores which sell these products.
Deferred Delivery and Leverage Contracts - Promoters want upfront payments for "delayed" or "future" deliveries of commodities such as coal, oil and agricultural products. Be particularly wary of glowing promises of profits made over the telephone.
Mortgages and Deeds to Secure Debt - This type of scam involves "loaning" money to someone who wishes to purchase or refinance real estate. The caller tells you that you will receive an "interest check" and, in the case of default, you will gain title to the property. In most cases the borrower, if he or she exists, cannot pay the loan and the property is so undervalued that it will not cover the amount of the investment. In addition, you may find that the same property was sold to many investors.
Certificates of Deposit - Buying a note from a bank or savings and loan is usually a legitimate investment. Be very wary of anyone offering a high interest rate on bank instruments. Don't purchase anything if the bank is not regulated by the State of Georgia or the U.S. Government. Many "banks" are one-room offices on offshore islands.
Livestock and Exotic Animals - One of the common scams involving livestock is breeding and raising herds on the investor's behalf. Another common scam involves the purchase of exotic birds such as emus or ostriches or their eggs. The gimmick is usually a "market for the meat or hides of these birds" that will bring a great return, or the investment is in competition with the standard beef, chicken or pork markets. Try and remember the last time you or anyone you know had an emu burger!
Tax Shelters or "Offshore" Investments - Beware of callers who represent that they can "defer" or "hide" money from the U.S. Government in tax shelters or offshore accounts. Legitimate trusts and shelters can be obtained through licensed, regulated professionals such as accountants and attorneys.
New Technologies - Beware of the caller who has the inside track on some new patent or invention which is a "money maker" and is soliciting money to help fund development.
Stocks and Bonds - Most stocks and bonds are subject to regulation by both state and federal authorities and are usually listed on a regulated stock exchange. Offering materials such as prospectuses are available BEFORE YOU PURCHASE stocks and bonds. Even though the caller says, "You need to make your decision right now," ask for written materials such as financial statements and contracts.
Oil and Gas Wells - Beware of callers offering "working interests" or "partnerships" in proven oil and gas fields or guaranteed "wild-cat" wells. Callers may offer an "interest" in a license issued by the U.S. Government to obtain the rights to drill. Often, the deals are scams and the oil wells do not exist. This is one of the most common con games played by criminals.
Corporate Notes - Beware of callers who offer a high rate of return on money invested with or loaned to a corporation.
Charitable Donations - Many charities and fundraisers who work for charitable organizations are required to register with our office. If you are contacted by phone to purchase a product or make a donation to a charity, call our office and obtain information.
There are many investment opportunities available and the telephone provides salespeople many potential buyers. When you are contacted at home or at your place of business remember: It takes just a few minutes to contact our office at (404) 656-3920 to obtain valuable information about the caller or the investment. If the information is not available, every effort will be made to connect you with someone who can provide you with the necessary information.
Love and Hate
A bad investment begins when an unsuspecting investor takes the advice of a con artist. These criminals are experts in the con game. Every year, they win over thousands of victims. While all of us are fair prey for the con artist, widows, the elderly and young professionals who are making significant sums of money for the first time make attractive targets. You can protect your investment dollars by knowing the traits that a con artist "loves" and "hates" in an investor.
A con artist loves the investor who is willing to talk on the phone with a stranger about an investment opportunity. These callers will trick you with confusing facts, glowing promises and outright lies.
A con artist hates the investor who hangs up on the call. This investor deals only with reputable investment firms.
A con artist loves the investor who is easily overwhelmed by and believes a barrage of glowing promises of riches.
A con artist hates the investor who hangs up on calls offering deals that are just "too good to be true."
A con artist loves the investor who makes an immediate decision to invest, believing the caller who says, "Tomorrow may be too late."
A con artist hates the investor who hangs up when rushed or pressured into making a decision.
A con artist loves the investor who believes the ploy, "You don't need it in writing."
A con artist hates the investor who asks for complete details before investing.
A con artist loves the investor who can be persuaded to invest in exchange for a gift, favor or dinner or who feels too guilty to say "no" to the deal.
A con artist hates the investor who refuses to accept any offer of a free gift or doesn't let the gift of a $9.99 watch cause feelings of guilt that result in a $10,000.00 loss.
A con artist loves the investor who says, "I don't really have the time to look into this, please take care of it for me."
A con artist hates the investor who asks for information or wants to submit the plan to his accountant, attorney or broker for an unbiased recommendation.
A con artist loves the investor who jumps at the chance to "get in on the ground floor" ahead of his friends and business associates.
A con artist hates the investor who shies away from "ground floor" offerings, knowing that just below the ground floor is a basement.
A con artist loves the investor who will not ask questions or check the information before investing.
A con artist hates the investor who responds to the call by saying, "Let me make a few phone calls to verify what you are telling me and I'll call you later."
A con artist loves the investor who goes for "new inventions" as surefire money makers. Whether the investment has to do with solar energy, pollution control or satellite navigation, this investor believes the promises offered by the con artist.
A con artist hates an investor who questions promotions dealing with so-called "latest technology" with unhurried skepticism.
Remember, you do have the opportunity to ask questions on the phone BEFORE YOU WRITE YOUR CHECK! Ask the questions in this checklist or any other questions that will satisfy you. If you still have doubts, hang up and call our office.
For more information, contact:
Georgia Secretary of State