Through the years I've seen many other similar schemes directly and in the news. The scams range from the crude to the sophisticated. Some scammers build trust with their victims for years. Others make impressive presentations and hand out business plans. They keep evolving to keep one step ahead of their intended victims.
How then do you spot a potential scam? Here are some clear warning signs:
You are encouraged to bring in other "investors" - Earnings are paid out of new members' funds. This is becoming less popular with scammers because of increasing public awareness of Ponzi schemes.
"Guaranteed" high yields - If the "business" promises sure returns higher than what is available from the banks, walk away.
Name-dropping - The "business" tries to bolster its credibility by claiming politicians, government officials, and celebrities as among their investors. Remember, famous people can be scammed too.
Missing Securities Documents - Many scammers wil show you SEC registration papers and other documents. SEC registration does not make an investment legitimate! They need a separate license to be able to offer investments to the public.These are just some of the things to watch out for. Remember, stay safe and don't rush into things!