Fraudsters send attractive offers through letters, e-mails, calls, SMS messages asking you to deposit money to participate in schemes that "sound too good to be true". Later, they withdraw the money and stop further communication.
Here is a list of the most common frauds:
- Contests and lotteries that you had not registered for, asking you to make a payment for receiving your prize
- Emails appearing to have been sent from large corporations, public institutions and regulatory bodies
- Phone calls or SMSes offering jobs that you had not applied for; intimations of gifts or inheritances supposed to originate from a foreign country, asking you for personal information
- High-yield investment plans and multi-level marketing schemes offering unealistic returns on investment; please checks the credentials of the person offering these
A Ponzi scheme attracts investors by offering guaranteed and unusually high returns, based on short-term and often complex investments. However, the underlying investments don’t exist. Returns are paid to the initial investors from the funds of subsequent investors, rather than from any actual profit earned. The perpetuation of the scheme requires a continued stream of money from new investors.
Tips to avoid a Ponzi scheme:
- Beware of claims of guaranteed investments with above average returns
- Ensure that you receive detailed written information to fully understand and assess the underlying investment details
- Assess the promoter of the investment and do your homework, i.e. background check, whether they are licensed to sell securities - if they claim they are exempt, check with the local regulator
- If you have already invested and you are pressured to reinvest your returns, or there is a disruption of services by the promoter, contact the local regulator
- Consult an unbiased third party—like an unconnected broker or licensed financial advisor—before investing
- Always deal with a SEBI registered or authorised intermediaries, only
- Although many investment transactions are conducted by phone or online, be cautious about investment companies without established premises or offices
- Do not respond to unsolicited e-mails about investments, job offers or any requests for personal information without independently verifying the contents of the e-mail or phone call
- Avoid investments you are uncomfortable with, or don't understand
- Be vary of "get-rich-quick" offers and "hot tips"— you may stand to lose much more than you'll gain.
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