Wednesday, October 15, 2008

How To Lose Your Life Savings

The worst possible financial disaster is to lose our nest egg to a scam after having spent our life carefully saving and investing. There are so many financial scams to avoid. For every honest method of making money, there are dozens of ways to fleece people!

Many scams are a variant on what is known as advance-fee fraud. This involves taking money upfront, with a false promise of delivering far greater sums further down the line. E.g. bogus lotteries, Nigerian 419 scams and Ponzi schemes.

Many experienced investors have been taken to the cleaners by what are known as ‘boiler rooms’. Setting up a boiler room is remarkably simple. First, rent a cheap office space in a far-flung location with plenty of English speakers. Add a ‘virtual office’ with a half-decent website. Next, recruit a bunch of young salesmen.

Start cold-calling prospects; start sending millions of spam emails. The companies being promoted could either be genuine or entirely fictitious firms. It does not matter if the ‘incredible investment opportunity’ involves real or fake businesses. All that matters is that investors send lots of money.

The salesmen (‘opener’) should make hundreds of calls daily, sticking closely to an agreed script. Once a ‘mug punter’ shows an interest in the ‘hyper-growth share’, he has taken the bait. The ‘closer’ convinces victims to invest as much as they can, on the promise of making a guaranteed fortune.

By repeating this exercise, it is possible to amass millions before vanishing. Even after closing down, they can still continue the scam. Simply set up an identical outfit under a new name. Contact previous victims; convince them that they can recover their losses. All they need to do is to sell their shares to a reputable company which wants them for tax-avoidance reasons. Of course, this service involves payment of an upfront fee and the game continues...

The simple way to avoid being scammed is not to be overcome by greed. Be extremely skeptical of anyone contacting you to discuss investment opportunities. Do not be fooled by impressive-sounding names, plush addresses and impressive locations. In many cases, these bogus brokers work from squalid basement offices -- hence the boiler-room tag!

Watch the film Boiler Room. After watching this eye-opening movie, you may never answer your phone in quite the same way again!


Kayage said...

People need to knock into their heads that there is not Free ride! When someone offers you heaven, be skeptical.. be so so skeptical!!! Check with friends and relatives. The key ingredient is - Whatever you do, NEVER rush in!

CheeWee said...

When the offer is too good to be true, yeah! be cautious - find out more. How abt yr kutu? i heard of cases, the boss running away with the $$$..

Kayage said...

i dont indulge in kutu, bro.. it was just one of the means to put ur eggs in.. Posting about it does not equate indulging into it.. KTM is a diff. matter tho.. I do it once in a blue moon.. Some people calls it Tax for the mathematically-inclided!! LOL!!