The More You Know…

The number of scams seems endless. Check your email spam folder sometime and scroll through the endless list of solicitations offering you bogus romance, lottery winnings, investment opportunities, insurance products, credit card and bank account alerts, and anti-virus software. The Oxford English Dictionary has fewer words.

Most cons can be lumped into broad categories. Knowing the categories may make it easier to spot a con. Scamwatch.gov.au lists:

–Attempts to gain your personal information. These include phishing (called whaling and spear phishing when it targets businesses and business executives), hacking, identity theft, and remote access scams (those phony computer repair guys)

–Buying and selling scams. These include false billing, classified ad scams (think Craigslist), sham health and medical products, mobile/cellphone premium services, online shopping scams, overpayment scams (legitimate sellers are targeted with bogus refund demands), and psychic/clairvoyant scams

–Dating and romance scams. Swipe left

–Bogus charities

–Investment and betting scams. These include real estate and mortgage scams, boiler room operations selling risky penny stocks or phony stocks, and bogus software that promises “guaranteed” gambling wins

–Job and employment scams. These include get-rich-quick schemes, pyramid schemes, and job opportunities that require starter kit fees

–Threat and extortion scams. These include malware/ransomware that infect your computer when you click a link in a seemingly innocent email and demands for ransom or bail money

–Unexpected money scams. These include bogus inheritances from long-lost relatives, offers to give you a cut of foreign money if you transfer it to your bank account (a.k.a. money laundering), and rebate scams

–Unexpected winning scams. These include fake scratch-off lottery tickets, bogus free trips, and phony prize/lottery winnings. Did you enter a contest? Then you didn’t win.

You may have noticed the absence of Ponzi schemes from the above list. Ponzi schemes and pyramid schemes are similar. Investopedia describes pyramid schemes as those that require initial investors to recruit other investors who recruit still more investors and so on and so on. Investors pay recruiters and money flows up the pyramid to the earliest investors at the top of the pyramid. A fine line exists between pyramid schemes and multi-level marketing plans. A key difference is whether the sales person makes the bulk of their profit from selling products to buyers or from recruiting other sales people.

Ponzi schemes, on the other hand, involve fraudulent investment management. A sham portfolio manager pays earlier investors with money conned from later investors, without making any legitimate investments, until the money runs out. One person controls the entire scam. Ponzi schemes are named after Charles Ponzi, who conned New Englanders into bogus postage stamp investments in the 1920s. Credit for the most famous (most infamous) Ponzi scheme goes to Bernie Madoff, who conned 5000 clients out of $65 billion over decades by funneling their money into his personal account while pretending to make investments.

Have you run across any of these scams? Can you think of any others? Comment here or join the discussion on Facebook

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