Tuesday, September 04, 2007

Online Investment Scams

Internet is a great tool for investors, allowing them to easily and quickly research investment opportunities. But the Internet is also a prolific place for fraudsters. This is why you have always to think twice before you invest any money in a site.

The Internet permits to anyone to communicate with a mass audience without spending too much time or money. Any individual can reach thousands of people by building a website, posting messages on discussion boards or chat rooms, by buying traffic or entering into traffic exchange schemes, by advertising with banners or pay per click sites or by sending mass spam emails.

It's easy for scammers to make their messages look credible. They often use basic manipulation techniques such as fake testimonials. But it is very hard for honest investors to make the difference between facts and fiction.

One of the first rule is to not trust anything you didn't ask for. If you got an email from someone you don't know about a great offer, then disclose it immediately. Honest companies don't use aggressive advertising methods. Many newsletters owners get money from companies to
spread false information or promote worthless stocks.

Those who are looking for quick and easy investments or money making opportunities can become a victim of pyramid plans or nigerian email scams.

Beware of the pyramid plans. You can find many banners or text ads about how you can double your money in a few days. People who run these sites usually use payment methods that don't support chargebacks such as e-gold. The sites work like this: you put your money there, let's say $100, then they claim you will get $10 daily for 30 days so you will totally have a 200% profit in just one month. After you have paid, you will eventually start getting $10 for a very few days and you will start to believe everything is true so will ask your friends to join or maybe you will invest yourself more money. Then suddenly the site gets closed you hear nothing about them, you cannot track them because they used anonymous servers, anonymous domains and anonymous accounts. They will start a new site and start over tricking other people.

Nigerian email scams are one of the top fraud phenomena on the Internet. Almost any Internet user who owns a mailbox have received at least once an email from someone claiming to be a very rich person who needs assistance to get a big amount of money out of some country or bank. System administrators or user support mailboxes sometimes get hundreds of such emails every day. They are written in a good english, overusing capitalization and making everything look official. Victim may get excited, would call them, then they will be asked to send a small amount of money for some arrangements in order for the nigerian to make the big transfer, then he asks for more and more money until you finally realize you got scammed.

Coin or roulette programs sometimes look very attractive. But the programs behind them are not honest and they will always generate the odds in a such way you will always lose.

Back to investments, you may start your verification about a company with the SEC's EDGAR Database.
The federal securities laws require many public companies to register with the SEC and file annual reports with audited financial statements. You can access and download these reports from the SEC database for free. Before you invest money in a company, check whether it's registered with the SEC and read the reports.

Always do more research by using other techniques than just reading on websites or newsletters. Check the company's domain whois data, make phone calls, try to contact other companies which worked with your targed. Make research about the people behind the company. Check if they are real and which is their history.

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