Watch Out For These Financial Scams

They say “prevention is the best cure” and so it must be true. In these tumultuous times, let’s learn about some of the financial scams so we can -hopefully- avoid them! *fingers crossed*

1. Phishing

Yes, phishing not fishing! I’m sure that anyone with an email has encountered at least one or two Nigerian princes and princesses that are in need of money.

First, the only prince you should listen to is Prince! Secondly, trust me when I tell you that if a “royal” needs money from you, then they’re not royal by any means! If they want money, they can go to Netflix like normal royals!

But phishing is not just a pool of fake royals, they are emails that look extremely authentic. They always come with a link to a fake website that once you click on it, you’re doomed! So, make sure to read any email well enough before you do yourself some damage.

2. Ponzi Scheme

We talked about Ponzi scheme before, but essentially it’s when any money manager uses “new investments” to pay “returns” to previous investments. You might have heard of the biggest Ponzi scheme of all time in which Bernie Madoff takes all the credit! His Ponzi scheme lasted for about 20 years and reached about $50 billion! He died in 2021 while serving his sentence of 150 years in prison. If you want to know more about this long con, check out The Wizard of Lies or Madoff: The Monster of Wall Street.

3. Pyramid Scheme

Not to be confused with its sister-in-crime, a pyramid scheme doesn’t require an investment, but instead, it does require a fee to get returns. There are close similarities with Ponzi scheme because there are no actual investments, they’re just returns from new investors. When there are no longer new investors, the pyramid comes crashing down!

It does seem a little familiar, right?! Avon and Oriflame, anyone?! But, in fact, they’re not pyramid schemes, they run on multi-level marketing (MLM) strategies. MLM strategies focus on selling actual products, unlike pyramid schemes which focus on recruiting people. In most cases, pyramid schemes try to disguise themselves as MLM programs.

4. Pump & dump

Pump and dump is a rumour-based scheme. It’s basically when someone, usually a fraud, spread a rumour that stock X is all the hype now as a way to create a buying frenzy. This will “pump” the stock price and then the same con artist will then sell/ “dump” the shares of the stock at the new inflated price.

Now you know what to watch out for! You're on your own, kid!

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