INVESTMENT SWINDLES AND CON SCHEMES GLOBAL HEADQUARTERS • THE GREGOR BUiLDinG 716 WEST AvE • AUSTin, TX 78701-2727 • USA INVESTMENT SWINDLES AND CON SCHEMES TABLE OF CONTENTS I. INTRODUCTION II. INVESTMENT SWINDLES AND CON SCHEMES OVERVIEW Who Are the Perpetrators and Victims of These Schemes? .............................................................................. 3 Why Do the Perpetrators Commit These Con Schemes? .................................................................................. 3 Video ...................................................................................................................................................................... 4 Why Do Consumers Become Victims to These Schemes? ................................................................................ 4 What Are the Red Flags That Characterize These Con Schemes? .................................................................... 5 How Are These Con Schemes Executed? ............................................................................................................. 5 Effects on Consumers .............................................................................................................................................. 6 Review Questions ..................................................................................................................................................... 7 III. INVESTMENT SCHEMES Introduction ............................................................................................................................................................... 9 Bonds ....................................................................................................................................................................... 10 Junk Bonds .......................................................................................................................................................... 10 Zero-Coupon Bonds .......................................................................................................................................... 11 Certificates of Deposit ........................................................................................................................................... 12 Callable CDs........................................................................................................................................................ 14 Equity Indexed Certificates of Deposit .......................................................................................................... 16 Collectibles ............................................................................................................................................................... 16 Art ......................................................................................................................................................................... 16 Precious Stones and Metals .............................................................................................................................. 17 Rare Coins ........................................................................................................................................................... 17 Commodities ........................................................................................................................................................... 18 Exotic Commodities .......................................................................................................................................... 18 Oil and Gas Investment Fraud ......................................................................................................................... 18 Video .................................................................................................................................................................... 19 Crowdfunding.......................................................................................................................................................... 19 Digital Currencies ................................................................................................................................................... 19 Futures ...................................................................................................................................................................... 20 Commodities Futures Contracts ...................................................................................................................... 21 Commodity Trading Systems ........................................................................................................................... 24 Commodity Pools............................................................................................................................................... 24 “IRA-Approved” Investments .............................................................................................................................. 25 Variable Annuities .............................................................................................................................................. 25 Offshore and Overseas Investments ................................................................................................................... 26 Foreign Exchange (FOREX) Investment Fraud ........................................................................................... 26 Prime Bank Guarantees ..................................................................................................................................... 26 Options ..................................................................................................................................................................... 27 Exchange-Traded Options ................................................................................................................................ 27 Relationship of the Underlying Instrument to the Option .......................................................................... 28 Option Values and Premiums .......................................................................................................................... 28 Over-the-Counter (OTC) Options .................................................................................................................. 29 Scalping Schemes ............................................................................................................................................... 29 Investment Swindles and Con Schemes i INVESTMENT SWINDLES AND CON SCHEMES III. INVESTMENT SCHEMES (CONT.) Hedge Funds ....................................................................................................................................................... 29 Promissory Notes ................................................................................................................................................... 30 Real Estate Investment Scams .............................................................................................................................. 31 Real Estate Limited Partnerships ..................................................................................................................... 31 Timeshares .......................................................................................................................................................... 32 Real Estate Options ........................................................................................................................................... 33 Securities ................................................................................................................................................................... 33 Repurchase Agreements .................................................................................................................................... 33 Treasury Securities ............................................................................................................................................. 33 Unregistered and Falsely Represented Securities ........................................................................................... 36 Stock Scams ............................................................................................................................................................. 36 Blind Pools .......................................................................................................................................................... 36 Late-Day Trading ............................................................................................................................................... 36 Micro-Cap Companies ....................................................................................................................................... 36 Online Day Trading ........................................................................................................................................... 38 Penny Stock ......................................................................................................................................................... 38 Worthless Stock .................................................................................................................................................. 39 Viatical Settlements ................................................................................................................................................