Don’t get scammed by dodgy investment schemes, OPP warns

FROM OPP  Criminal Investigation Services Anti-Rackets Branch                                


OPP Reminds you to Protect Yourself from Investment Schemes

Orillia, ONopp-logo – This year, due to the crisis in the investment market, many people are looking for alternative investment products which are not recognized and applied by large investment brokers.  

The OPP Anti Rackets Branch is particularly keen on reminding the public to be weary of the potential for these products to actually be investment schemes that may defraud you of your investment money.

There are a large amount of investment schemes in Ontario and through out the world.  Many of these schemes lure victims by promoting high rates of return for investments made.  The perpetrators of these schemes are usually vague when it comes to the details of where they are investing your money.  

They may tell the potential investor that providing too much detail of where the money is being invested may result in getting under cut and lose the business opportunity.  The investor’s money is usually not invested, but moved to offshore banks that don’t honour our banking regulations or procedures.  The results are that the money invested in these schemes is usually unrecoverable.

The perpetrators may also tell their victims that they are investing in “margin calls” or “future options” or the funding of small business’ that need immediate funds to assist in the growth of their business. One example of a fraudulent story often used is of a new company that makes furniture and needs seed money to make the furniture before they can sell it and return the investment to the investor with a large dividend for the loan.

The perpetrator tells the investors that the reason they are getting such a large dividend for their investments is because these types of small businesses can’t get a loan through conventional means (the bank) and they have to come to investment companies like the one the perpetrator is operating. The victims in these schemes fall prey to their own greed by being lured in with the promise of unreasonable profits. 

Another example of a fraudulent investment opportunity is a scheme called a “Ponzi”.  It involves initial investors that are paid exceptional dividends as “interest cheques” (or sometimes in cash if your investment was paid in cash).  These profits come from the deposits of the investments of a growing number of new investors.  

The perpetrators of this type of scheme can keep the scheme going only as long as they pay the early investors their dividends, which is taken either from their own capital investment money or from the capital from the new investors.  These types of schemes can go on for several years before the investors realize that they have been defrauded.

In these types of “Ponzi” schemes, the investors/victims are usually paid dividends either monthly or quarterly, depending on the arrangement.  The investors/victims often will unwittingly involve their friends and family members by sharing the investment opportunity/scheme and proposing their becoming involved in the scheme.  

Most of the time, the returns are so inviting that the investors usually roll over their dividend payments, with the encouragement of the fraudster, and never see any money. 

The perpetrators of these types of schemes often will give the investors a receipt or promissory note on a regular basis telling them how much their investment has grown.  They may also provide a copy of a prospectus or business profile exaggerating the success of the investment company.  

The perpetrators of these schemes may also provide the names of other investors that have been receiving their dividends on time for years, once again to keep the scheme going.

 This self propelled scheme attracts others to the scheme and it keeps going until the perpetrator has accumulated his target amount, lost the investors money in other business ventures or is incarcerated for other similar crimes. 

The perpetrators of these types of investment schemes misrepresent themselves by telling the investors that their capital is guaranteed by some type of collateral or a life insurance policy, which never exists.

If someone is offering you more than the bank is willing to pay for investing your money, then there is always a risk.  The greater the dividend promised the greater the risk.

“If someone is offering you an investment opportunity that sounds too good to be true, then it probably is” says D/Inspector Peter Shadgett, Officer in Charge of Anti-Rackets Branch.

“No one is immune to fraud. Common sense is your best protection.  Always do your research, talk to others and never be rushed into making an investment decision” added D/Inspector Shadgett.

For more information on schemes involved with Investment Fraud, login to the Ministry of Government Services website .

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