Investment schemes are not a new scam by any means, but the Internet has opened up brand new ways to scam people out of their money. This is due mostly to the fact that it is easy to create a website with a legitimate dot.com address that appears to be a reputable company. These types of scammers are well versed in Internet technology and design the websites themselves, along with a logo, fake addresses and phone numbers, and even email addresses that don't give you much cause for concern. The primary motive for Internet-based investment schemes is simple; get as many people as you can to believe in your company and send you money. Unfortunately, they use a variety of tactics to trick the victims of this type of scheme out of sending large sums of money.
If you can identify an investment scheme, you can avoid being caught up in one. For starters, never invest your money in a company you are not aware of or does not have a good standing. Do a little research and see how long the company has been around for. If you find nothing on them, they are brand new and may not be trusted. You can also search for them on the Better Business Bureau website to find out if they have any negative marks against them. Never invest money in a company that has sent you an email randomly; how did they find out who you are? Chances are, the email was sent to hundreds of other people, but they blocked the other addresses so it appeared to only be sent to you.
There are four main types of investment schemes; Ponzi schemes, Pump and Dump, Off Shore investing, and Prime Bank. The Ponzi scheme, also known as pyramid schemes, asks new investors to provide funds for previous investors, and so on. The previous investors make money from each new investor as the pyramid continues. These schemes will eventually collapse, causing everyone to lose money from it. The pump and dump scheme involves illegally raising the prices of stocks through "Secret" channels like web forums and private emails, then the scammer will sell their stocks at this inaccurate high price, before it falls back to where it should be. The victims are the ones that do not realize this, and lose money on their stocks.
Offshore Investing, which is investment schemes in other countries, has severely affected U.S. and Canadian investors. These companies are located in foreign countries and are therefore protected by their own law enforcement agencies. It is very difficult to prosecute individuals or companies in other countries. To protect yourself, keep the majority of your investments in the U.S. or for well established, reputable companies. "Prime Bank" refers to the top 50 banks in the world and this scam tricks investors into trading bonds and notes called International Monetary Funds bonds and Federal Reserve notes. These terms are almost always associated with an investment scheme and should be avoided.