Have Something in Common? Doesn’t Mean the Investment He or She is Pitching is Real.
As attorneys who represent investors who have lost money to fraudulent investments, the one thing all of our clients agree upon is that their investment advisor “seemed like a really great guy/gal”. The old adage “you can catch more flies with honey than vinegar” is correct. Fraudsters know how to turn on the charm. If they were rude and obnoxious, no one would give them money to invest. Fraudsters are experts at deception. They know that people are inherently more likely to trust someone who has something in common – same ethnic background, same religion, both veterans, same alma mater etc. When fraudsters target members of a particular group, it is called affinity fraud. Simply put, just because someone is a fellow veteran, goes to the same synagogue, went to the same college, or has a child in scouts with yours, doesn’t mean they are honest when it comes to investing. You should always know exactly who you are dealing with and what they are pitching, even if you have things in common. Here are some pointers to keep from becoming a victim of affinity fraud:
Trust, but verify. Always check the background of the individual who is soliciting your investment. Do this no matter how honest they seem. If they work for a FINRA brokerage firm, you can look them up at BrokerCheck. BrokerCheck will tell you whether they are licensed (as required by law to sell securities) and identify any past investor or regulatory complaints. If they work for an investment advisor, you can research them at sec.gov. Don’t rely solely on a résumé or background information provided to you by the individual. Even a simple Google search can be enlightening.
Research the investment Don’t rely solely on the claims by the individual about the investment. Do find out everything you can about the potential investment from reliable sources such as the Securities and Exchange Commission’s investor.gov site. Be very wary of statements of “guaranteed returns.” Do not fall for claims of “no risk.” The higher the return, the greater the risk. Period. If the individual tries to dissuade you from independently researching the potential investment, that is a huge red flag.
Take your time Legitimate investments aren’t generally “limited time offers.” It takes a lot longer to earn money than it does to lose it. Research every “opportunity” before you decide. Just because someone you know made money doesn’t mean it is legitimate or right for you. The initial investors in Ponzi schemes receive money too – from the investments made by the later investors – not from actual profits.
If you have been the victim of investment fraud and have lost $100,000 or more, contact the securities and arbitration attorneys at McCabe Rabin for a free and confidential consultation.