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Updated on January 9, 2011


Investment scam is a kind of fraudulent situation where unsuspecting investors are ripped off their money by fraudsters disguised as business men and women that facilitate investing activities.

Ponzi scheme is a good example of investment scam. Some people call it wonder banks scam. Ponzi scheme is an investment scam that promises unrealistic returns on investment, collect people’s money, spend majority of the money on personal luxury items and use the remaining part of the newly collected funds to pay off old investors. This will continue until the long arms of the law catches up with the perpetrators of such fraudulent scheme.

Madoff investment scam is another instance where people have been ripped off wealth with bogus promises of paying abnormally high return. An Harry Markopolos, CFE, CFA, the whistle blower of the Madoff scam stated in his book titled ‘No one would listen: a true financial thriller’ that “WALL STREET KNEW MADOFF WAS A FRAUD” This explains the almost helpless situation that we are almost finding ourselves into.

As simple as these schemes are, people- many people still wail on the front page of newspapers and the homepages of websites how they have been fooled into throwing their retirement fund away within a twinkle of an eye.

This worrisome situation now raised the questions: why do people including me (yes, I have once fallen for the tricks of wonder bank operators in my country) still fall for these investment ‘scammists’? Has investment fraud become a pandemic? Traditional causes of investment fraud have been identified but, why does it still persist?



Greed still remains the principal cause of fraud of any kind. You will probably not be defrauded if you are not a greedy person. How can you expect to get a return of over 2000% on an investment that is not your business and hope to be safe while doing this? Such returns are only possible in a business you are doing for yourself. In my own case, I greedy to have expected a return of 300% on the money I gave to them with a period of 30 days.


Another factor that is largely responsible for the increase in the rate of investment scam is lack of education. It is believed that human beings are rational and would always be rational and would therefore not fall victim of investment fraud if they are well informed of the activities of fraudsters and scammers. I therefore urge you to seek information on the activities of fraudsters and be safe.


Hardship and hard times are contributing to the damaging effects of fraud and scams on our society. How can you tell an hungry man not to seek quick means of making money when he sees an opportunity not minding whether it is real or not. No amount of education given to a hungry man can make him not to have a second thought on that too good to be true investment proposal presented to him by that scammer.


Poor economic policies on the part of the government cause people hardship thereby pushing them to scout for quick fixes to their financial problems where there are none.

I am sure that the rate at which investment fraud and investing related scam take place will be significantly reduced if the above identified problem areas are swiftly and urgently resolved.

You may want to read up other kinds of scams like the jobs scam.


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