Everyone wants to multiply their savings in hope for a better future, yet most investments don’t go as planned. There are many complex scams that operate in plain sight to take advantage of the most gullible to turn a quick profit. In general, if the profit potential is presented as being abnormally high or if there is no real-world application to the company’s model, it is likely something to avoid.
Pump and Dump Schemes
A Pump and Dump is a classic way to separate investors from their money through the stock market. A company is hyped up through media campaigns to drive up demand for an otherwise useless stock. While some of the early buyers may turn a profit, the organizers of the pump will gradually sell off to oblivious buyers until everything collapses. Such schemes are also seen in the cryptocurrency market as of late.
Promissory Note Scams
Although promissory notes are involved in legitimate investments into company debts, it is also a common vessel for complex fraud rings. The idea is to loan money to a company from with the promise to pay the amount back, with interest, over a certain period of time. The promissory note is issued as part of this agreement.
Legitimate promissory notes are usually not marketed publicly towards individual investors, so this should be your first sign of a scam. The person selling the scam may pose as a real estate agent or a bogus investment company and target people that may be oblivious to the securities market (like elderly retirees).
Fake notes are typically from non-existent companies, even though they may have a legitimate appearance with a golden seal. Be diligent about investigating the companies involved, as well as the entity selling the note.
An ICO (Initial Coin Offering) is a play on the acronym IPO but with cryptocurrencies. Although a few of these projects seem promising, the vast majority are blatant scams designed to run off with investors’ funds. Since many projects are creating using fake credentials and accept only cryptocurrencies, it is difficult for authorities to trace these scammers.
Fake Forex Dealers
The exchange of foreign currency is one of the largest and most liquid financial markets on the planet. The idea is to purchase currencies when they are low and sell them when their exchange rate increases. The problem is that the Forex market is not very accessible to everyone, especially with smaller currencies that are not commonly traded outside of their localities.
There are many unregulated foreign trading companies that operate through the internet and often take advantage of desperate investors. These companies may operate as trading platforms or investment funds and require you to wire a minimum amount to an overseas bank account. In the majority of cases, they will run off with your money.
Investment Recovery Scams
This type of scam will generally target investors that have lost a great deal of money due to a market crash, scam or another unforeseen circumstance. The perpetrators may pose as a representative from a law firm or trustee that is starting a class-action lawsuit to recover their funds. They may also pose as a company offering to buy their depreciated assets that will turn them a profit.
The only catch is that they will ask for a refundable fee, tax, or transaction fees upfront. Obviously, when the victim pays their fee, the scammer will cut contact and move on.
There are endless possibilities for financial scams, some of which may not have been uncovered, which is why it is always necessary to be precarious in where you invest your money as a digital nomad. Common scams may have you pressured by unrealistically high ROI projections, charismatic or aggressive sales associates, or dazzled an illusion of a groundbreaking company. Don’t separate yourself from your hard-earned money and educate yourself on legitimate investment methods.