A private placement program scam usually asks you to make a bet on the form of a questionable or insufficient investment. The majority of cases cause you to lose any or all of your funds. Here are some scams that you should avoid.

8 Typical investment scams

Scheme with advance fee

A advance fee scam is when the victim is convinced to pay money upfront to get promises of more. The problem is that the fraudster will take the money and the victim will not hear from them again.

Scammers typically are targeting investors who have lost money on the course of a risky investment. They'll contact the investor and offer to assist them in recovering the losses. They may say they will purchase or sell the investment for a significant profit for the investor, however, the investor has to pay an "refundable" fee and deposit, or pay taxes. If the investor sends more money, they'll lose that, too.

Boiler room scam

One common method for committing an private placement program scam is to build a temporary boiler room. To convince you that their business is legitimate, they could direct you to their website, which appears professional. They may also create an online number toll-free and an acceptable address to make the business appear authentic.

The company, however, isn't even a thing. The website is bogus and the office is a temporary box or post office. By the time you realize that you've lost money, the scammer will have closed up shop and will be on the lookout for another scam.

Exempt securities fraud

When a company wants to sell securities, it has to submit a prospectus to the securities regulators. Exempt securities are a different case. They are able to be offered without a prospectus, however they're restricted to accredited investors, or subject to certain other restrictions.

Exempt securities by themselves are not scams. Scammers can try to convince that exempt securities aren't frauds. Unsolicited calls or emails about an informational tip on an organization that is "going public" should be suspicious. It is possible that you will be told the opportunity is limited to wealthy people however an exception could be made for you. You may be asked to sign document that is false about your income or net worth. If you have to lie about how much money you have it is a sign of someone who breaks the rules.

Forex fraud

Foreign exchange (forex market) is the biggest and most liquid financial market. The purpose of trading currencies is to earn money from changes in exchange rates. But trading in foreign currencies can be very risky. Forex ads promote an easy access to the market for foreign exchange usually through classes or programs. However, the market for foreign exchange is controlled by large, well-resourced international banks that have highly educated personnel, access to cutting technologies and huge trading accounts. It's difficult to keep up with these experts. Forex trading is extremely risky.

Additionally, certain forex trading programs could be illegal or fraudulent. Because forex trading services are often operated online from another country, unregulated companies could be selling their products outside of the rules. There is a chance that you won't get the funds you have invested in accordance with the claim. In this scenario, you might be asked for money to be wired into an account offshore. The funds then become unavailable. You could lose all or some of your money in any of these circumstances.

Offshore investing fraud

If you are able to transfer money offshore to another country, this scam promises big profits. The main purpose is to avoid or lower your tax burden. Avoid tax avoidance schemes. It is possible to be liable to the government in back taxes, interest, and penalties.

There are other risks associated with offshore investing, too. If you transfer your funds to another country and it goes wrong, you won't necessarily be able to take your matter to a civil court in Canada. It could be difficult to get the money back.

Pension fraud

The scam targets people who have retirement savings that are in the form of a Locked In Retirement Account (LIRA). In most cases, you aren't able to withdraw money from an LIRA until you are 55 years old or older. There is a chance that you'll be taxed on the money that you withdraw.

This scam is commonly promoted in advertisements as an "RRSP loan", which allows you to get around tax laws and access your funds that are restricted. To qualify for the loan, you need to sell your investments you hold within your LIRA and use the money to buy shares of a start-up business that the promoter selling. The promoter will loan you 60% to 70% of the money you have invested. The remaining amount will be kept by the promoter in the form of a fee.

Investors who join the scheme in the beginning may earn good returns quickly from what they consider to be interest-paying cheques. Investors can be so content that they choose to invest more or find new investors through their circle of friends.

The investment isn't real. The "interest cheques" are paid with investor's own funds and from the new investors. At some point, new investors stop taking part in the scheme. The scheme stops giving money and there's no way to replace it. The promoters then disappear, taking the entire money with them.

Scam of pump and dump

In these scams, fraudsters make the lists of investors who could be interested to advertise a great bargain on a stock that is priced low. The company or person who contacted you may also be a shareholder. This stock might not be genuine. The stock's value rises when more investors buy shares. The scammer will sell their shares once the stock reaches a peak and then it decreases in value. You're left holding worthless stocks.