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The Internet has become a breeding ground for scammers for so many reasons; the perpetrators do not need to deal face to face, it’s inexpensive to pitch and it’s hard to get caught. Since online fraud has become so prevalent, it’s crucial to know what is out there: Learn About Types of Scams that have been identified by the SEC Much of the investment fraud that happens online resembles the same types of scams that used to occur on the phone or through the fax machine. Of course now, with the Internet, criminals have access to a greater range of promotional tools such as bulletin boards, email and chat. Even their web pages can be made to look as attractive, professional, or sparkly as required, to attract the market group that they are aiming to mislead. There are Three Main types of Online Scams 1. The Pyramid This type of scam may be the most recognized but it stills draws people in because the claims make the opportunity seem so lucrative that many have a hard time resisting. The classic example of a pyramid scheme is a claim that thousands of dollars can be made online, with a very small (think $5) investment, in only a few short weeks. The way that it really works is that family and friends have to be recruited and also pay the original “investor” to see a return. Essentially, this is not a business or an opportunity. 2. Pump and Dump This is pumping a stock and then dumping the investor. Commonly found in messages posted online, the scam convinces readers to buy a stock quickly or urges them to sell before a price drop. The poster will announce that they have exclusive inside information regarding a development about to break through. These posters may be insiders or paid promoters who are profiting by selling their shares after the stock price is pumped up by gullible investors. Once these con artists sell their shares and stop hyping the stock, the price typically falls, and investors lose their money. This trick is common when trading with smaller companies because it's easier to manipulate a stock when there's little or no information available about the business. 3. Off-Shore Frauds It’s difficult for U.S. law enforcement agencies to investigate and prosecute foreign frauds and this weakness is exploited by fraudsters. Before the Internet, foreign fraud was much more difficult to pull off with differing time zones, currencies and high priced long-distance phone calls. The online marketplace has virtually eliminated every one of these obstacles for off-shore scammers. For investors, avoiding scams really does come down to not believing hype, avoiding opportunities that seem too good to be true, and taking the time to research or hire the counsel of experienced professionals. Stephen W Carnes share prevention tips to help investors recognize illegitimate opportunities. For more information avoiding scams, check out these official resources, including tips from the official SEC website. This is a great place to begin research: http://www.sec.gov http://www.finra.org/ http://www.otcmarkets.com Stephen W Carnes share prevention tips to help investors recognize illegitimate opportunities. For more information avoiding scams, check out these official resources, including tips from the official SEC website. This is a great place to begin research. Website at www.stephenwcarnes.com.
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