鈥淭he Trust Trap鈥� may sound like the next big rollicking comedy out of Hollywood, but it鈥檚 one of five warning signs for destructive investment fraud schemes that bilk investors out of their money, and the sa国际传媒 Securities Commission (BCSC) wants the public to know it鈥檚 far more common than people suspect.
Fraudsters take advantage of the trust amongst friends and family or in religious or cultural-social groups, convincing victims to invest their money in the scheme because of personal trust.聽
One fraudster who used this technique to a legendary extent is Bernie Madoff, who is infamous for running what may be the biggest Ponzi scheme ever, in which he swindled $65 billion from thousands of investors.
When friends and family reveal a 鈥渟ure thing鈥� offered by a friend or acquaintance, then urge you to get in on it before the opportunity vanishes, it鈥檚 a textbook example of how Ponzi and other fraud schemes succeed by leveraging relationships to gain trust. Those who unknowingly perpetuate the fraud are often devastated to discover their unwitting complicity in the scam.
With March being Fraud Prevention Month, the BCSC hopes to empower investors to be skeptical of 鈥渉ot investments鈥� heard through word-of-mouth. When friends and family reveal a 鈥渟ure thing鈥� offered by a friend or acquaintance, then urge you to get in on it before the opportunity vanishes, it鈥檚 a textbook example of how Ponzi and other fraud schemes succeed by leveraging relationships to gain trust.
These days, people are on the receiving end of a torrent of information, so it鈥檚 understandable if they may put more trust in personal referrals. But the BCSC urges you to go online and use their free investor education resource, InvestRight.org, to learn how to spot deals that are too good to be true.
The 5 Fraud Warning Signs
1. The Trust Trap
An important thing to know is, the person who鈥檚 brought you the opportunity might not even know fraud is taking place. That鈥檚 why this scam is successful 鈥� it trades on investors鈥� inherent trust in their friends and family.
2. High Return, No Risk, Guaranteed
The reason clich茅s like 鈥渢here are no guarantees in life鈥� exist is because they鈥檙e true. As InvestRight.org explains, fraudsters 鈥渕ay suggest that their 鈥榬isk-free鈥� investment is backed by 鈥榓ssets鈥� of some kind, or 鈥榟eld in trust鈥�,鈥� but this sort of assurance is bogus. There is no such thing as a high-reward no-risk investment, it鈥檚 that simple.
3. Fear of Missing Out
People don鈥檛 want to be left behind, and scam artists know this. They鈥檒l tell you others are getting rich while you鈥檙e sitting on the sidelines because you haven鈥檛 got the guts to jump on their amazing offer. If they talk of exclusivity and how others can鈥檛 get in on this deal without the golden invite they鈥檝e extended you, that鈥檚 a red flag, because legitimate investments usually have one requirement 鈥� having money to invest. Authentic investments aren鈥檛 about who you know, the luck of the draw, or a backroom deal.
4. Pressure to Buy
If there鈥檚 a ticking clock on the deal, it might be part of the fraudster鈥檚 ruse in which they pressure you to act fast. They do this so you can鈥檛 research the offering or turn to authorities like the BCSC to see if it鈥檚 a real deal. If you鈥檙e being pressured, err on the side of caution and walk away.
5. Questions Not Answered
Much like the 鈥渘on-denial denial鈥� that evasive politicians use to avoid tough questions, scam artists are masters of ducking and diving when you want information on their 鈥済reat opportunity.鈥� They may send piles of legalese and jargon that are hard to sift through and make no sense 鈥� a method of intimidation 鈥� or they might say they鈥檙e too busy to reply because others are so keen to jump on the opportunity you鈥檝e been offered. Follow your gut 鈥� if you think you鈥檙e getting the run-around, you probably are.
Older is Wiser, But Fraud Never Discriminates
While many investors 55 and older are savvy to such schemes, and the BCSC鈥檚 research shows those between 18 and 34 are most vulnerable to being scammed, the reality is that no one is immune.
Embarrassment and shame prevent many people from reporting scams, especially in close-knit groups where people may try to resolve it internally rather than report 鈥榦ne of their own鈥�. If you suspect someone is duping others, or you believe someone you love is being taken advantage of, file a complaint or submit a tip to the sa国际传媒 Securities Commission, either at or .
You can do it anonymously, but if you leave contact information, then investigators can follow up with you if they need more information.
