The ways and means of fraudsters

I have spent the last couple of months writing about online internet scams called high yield investment programs (HYIPs) which are a type of Ponzi. These schemes are promoted online through social media – Facebook, YouTube, Twitter, chat rooms, and the myriad of HYIP websites that list and analyze these programs.

That’s one way of enticing people to send money through bank wires and payment processors (PayAlert, Liberty Reserve, Perfect Money). Take a look at the Globe and Mail’s HYIP Highlights: Buyer Beware.

But there are many other ways that these folks can lure you into an illegitimate scheme.  One of the worst is through friends, family and acquaintances.  Many of these illegitimate schemes either become successful by using middle people, who know that the investment scheme is not legitimate, or don’t know.  But what they do know, in return for convincing others to invest, is that they receive a commission, an incentive to get more people to send money to whatever scheme is being promoted.

We have been involved in many cases where the fraudsters used promoters or middle people to bring in more people.  A key component for one called Manna Ponzi scheme was the use of existing investors to bring in new investors.  They were called ‘affiliates’ or ‘consultants’. They were paid one-time bonuses of between 10 and 15% of the amount invested by the new investor. They were also paid a monthly percentage of the amount invested by the new investors.

In the case of HYIPs, most offered what they called “referral” fees of 3, 5 or even 10%.  One offered a whopping 20% referral fee.

We at the BC Securities Commission are working hard to get the message across that religious communities are big targets for this type of fraud. Churches, mosques, temples – wherever people gather to worship and socialize – are ideal places for these middle people to find investors to help them earn a commission.

This year, we are expanding it to try to prevent and disrupt this type of activity from happening across the Province. We need all the help we can get.  If you belong to a religious group and want to learn more about how to avoid this type of activity happening, contact BCSC Inquiries.

To read previous posts on this and other topics, click on Let’s talk about investing.