Alert to Ohio Investors: Be Aware of 2011’s Five Most Common Investment Scams

Volatile stock markets and continued economic difficulties have left many investors scared for their financial futures and easy prey for con artists promising safe, high-yield investments, according to a Tuesday press release issued by the Ohio Department of Commerce.

"Con artists prey on peoples' fears by exploiting today's headlines with promises of ‘guaranteed' returns at no risk," said David Goodman, Director of the Department.

But, being alert to the top five investment scams being perpetrated this year can help Ohioans protect their hard-earned money. "Don't be fearful. Be knowledgeable," said Goodman.

This year, the following five investment schemes topped the list for most common scams:

#1. Ponzi Schemes. This is the fourth consecutive year that Ponzi schemes have topped Ohio's list of investment scams. Ponzi schemes are often characterized by the promise of guaranteed, high returns. Money brought in from new, unsuspecting investors is used to make payments to previous investors. Problems arise when the con artist is unable to bring in new investors, at which point the money dries up, the payments stop, and the scam collapses.

#2. Unlicensed and Unregistered Sales. Ohio officials have seen a consistent increase in unregistered sales, particularly by insurance agents who are not licensed to sell securities. The Division of Securities recommends investors always insist on seeing a proper license before investing with someone or following anyone's advice. Investors should also verify that the security is properly registered with the Division.

#3. Affinity Fraud. This type of investment fraud uses personal relationships or same-group memberships to swindle investors. Family or church members, neighbors, longtime friends, and/or community leaders exploit the trust others have placed in them in order to reap personal profit in a time of economic uncertainty. "If given the chance, a con artist will quickly betray your loyalty and take you for everything you've got," said Ohio Securities Commissioner Andrea Seidt in Tuesday's release.

#4. Promissory Notes. This year, unregistered and/or fraudulent promissory note offerings beat out scams involving non-traditional investments for a place in the top five. Many investors are lured by their promises of big returns, "principal protection," and fixed interest rates. Unfortunately, investors can suffer huge losses if the funds are not invested as promised, or if the issuers are unable to meet their obligations. Promissory note offerings are often fronts for other investment scams or Ponzi schemes.

#5. Distressed real estate schemes. The real estate crisis has led to the proliferation of investment offerings involving distressed real estate. "While many legitimate investment offerings are tied to real estate, investment pools targeting distressed real estate have become increasingly popular with con artists as well as investors," warned the Department in Tuesday's release. "Investments in properties that are bank-owned, in foreclosure, pending short sales or otherwise in distress inevitably carry substantial risks and should be evaluated carefully."

If you have lost money due to investment fraud or an investment scheme, contact one of our experienced Ohio investment fraud attorneys by calling 1-866-827-6537 or filling out our online contact form.