November 21, 2006
Vancouver – The British Columbia Securities Commission is warning people to be on the lookout for a suspicious investment scheme expanding throughout Greater Vancouver that promises investors extraordinary returns and commissions for bringing in new investors.
BCSC staff have received reports that people are being recruited by friends or acquaintances to attend exclusive meetings at which they are pitched a high-return investment requiring potential investors to sign non-disclosure agreements.
“We are concerned that this may be a Ponzi scheme – a scam that pays out current investors with money from new investors,” says BCSC Executive Director Brenda Leong. “If it is, then it is only a matter of time before this scheme falls apart with investors losing their money.”
While BCSC staff cannot reveal names or specifics yet, says Leong, they have learned that people can only invest with cash, money orders, or bank drafts.
“This cash-only investment criteria is a tell-tale sign that this could be a scam because typically this is used to avoid any incriminating documentation or provide a paper trail,” says Leong.
Leong says that the scheme exhibits many of the red flags that signal the investment is too good to be true:
- Promise of high returns
- Great investment opportunity – your friends can’t be wrong
- Secrecy – an insider opportunity
- Tax-free investment or use of a structure to evade taxes
- Lack of receipts or documentation about the investment
Leong is warning investors approached about an investment with these characteristics to make sure they do their research before investing. Part of this research is to examine thoroughly the backgrounds of the principals behind the investment deal.
“Investors should be checking to see whether the people selling the investment are registered to sell securities. Do they have a regulatory history, or have they ever run into financial troubles such as bankruptcy? Also, investors should visit the offices of the business to ensure they are operational and not simply a mailbox,” Leong says.
For resources on how to conduct background checks or what to watch out for to prevent falling victim to investment fraud or making an unsuitable investment, visit the BCSC’s new InvestRight.org website.
“This is the second InvestRight Investor Alert we have issued since announcing in October that we would be stepping up our efforts to intervene as quickly as possible to disrupt, stop and or prevent fraud from happening in BC communities,” Leong says.
“These alerts will help us to raise public awareness about suspicious investment activity. We are urging more people to report these activities to us earlier.”
In Part one, we talked about the big problem that British Columbia had with unscrupulous operators using the loosely regulated US over-the-counter (OTC) markets to fleece investors. Now, I am going to outline how we are cleaning up this market to protect BC investors and its reputation. Unfortunately, there was no one silver bullet to […]
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