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Investment Swindles:

Including 16 questions that can

While the vast majority of persons in the futures industry

and other sectors of the investment community serve the

investing public conscientiously and ethically, there are

inevitably those few who seek to exploit the trust which others

have labored so hard to earn.

This booklet has been prepared as a part of NFA's

continuing public education efforts to assist you in recognizing

and avoiding such individuals.

Contents

The Multi-Billion Dollar Business of Investment Fraud

Who are the Investment Swindlers?

Who are the Victims of Investment Fraud?

How Investment Swindlers Find (or Attract) Their Victims

Techniques Investment Swindlers Use

Several Investment Swindles and How They Worked

Questions That Can Turn Off an Investment Swindler

Before You Invest, Investigate

Finally, Don't Lose Touch with Your Money

The Multi-Billion Dollar Business of Investment Fraud

Americans are investors. We purchase stocks and bonds,

contribute to savings programs, own real estate, participate in

futures and options markets, acquire collectibles, provide

start-up capital for new business ventures, buy franchises, and

the list goes on. The strength of our economy is in large

measure the product of our combined investments.

Perhaps more so than any people in the world, we enjoy an

ever-expanding variety of investments to choose from, coupled

with the freedom to make our own investment decisions. It's our

money and we can invest it as we wish.

Unfortunately, some unscrupulous promoters abuse our

freedom to choose by concocting investment schemes that have

zero possibility of making money for anyone other than

themselves. Such persons promise investment rewards they cannot

possibly deliver and have no intention of delivering.

They are swindlers.

Many of them are very good at it. Their annual take

through lying and deceit is in the billions of dollars. If one

estimate of $10 billion a year lost to investment fraud is

accurate, that's more money than the combined annual profits of

the nation's three major automakers! Some say even that

estimate may be too low.

Successful investment swindlers use every trick in the

book, and some that aren't even recorded, to convince you that

none of the descriptions and precautions in the following pages

apply to them. After all, they are offering you a

once-in-a-lifetime opportunity to make a lot of money quickly

and you do trust them, don't you? As will be seen, some of

their methods of gaining your trust are truly ingenious.

Who are the Investment Swindlers?

They are a faceless voice on a telephone. Or a friend of a

friend. They may perform surgery on their victims' savings from

a dingy back office or boiler-room or from an opulent suite in

the new bank building. They may wear three-piece suits or they

may wear hard hats. They may have no apparent connection to the

investment business or they may have an alphabet-soup of

impressive letters following their names. They may be glib and

fast-talking or so seemingly shy and soft-spoken that you feel

almost compelled to force your money on them.

The first rule of protecting yourself from an investment

swindle is thus to rid yourself of any notions you might have

as to what an investment swindler looks like or sounds like.

Indeed, some swindlers don't start out to be swindlers. There

are case histories in which individuals who held positions of

trust and esteem-accountants, attorneys, bona fide investment

brokers and even doctors-have sacrificed their ethics for the

fast buck of running an investment scam.

In still other cases, investment programs that began with

legitimate intentions went sour through happenstance or poor

management--leading the promoter to mishandle or abscond with

investors' capital. Whether an investment is planned as a scam

or simply becomes one, the result is the same.

This is why, as we will discuss, protecting your savings

against fraud involves at least three steps: Carefully check

out the person and firm you would be dealing with; take a close

and cautious look at the investment offer itself; and continue

to monitor any investment that you decide to make. No one of

these precautions alone may be sufficient.

Who are the Victims of Investment Fraud?

If you are absolutely certain it could never be you, the

investment swindler starts with a big advantage. Investment

fraud generally happens to people who think it couldn't happen

to them.

Just as there is no typical profile for swindlers, neither

is there one for their victims. While some scams target persons

who are known or thought to have deep pockets, most swindlers

take the attitude that everyone's money spends the same. It

simply takes more small investors to fund a large fraud. In

fact, some swindlers deliberately seek out families that may

have limited means or financial difficulties--figuring such

persons may be particularly receptive to a proposal that offers

fast and large profits. A favorite pitch is that small

investors can become rich only if they learn and employ the

investment strategies used by wealthy persons. Naturally, the

swindler will teach them!

Although victims of investment fraud can differ from one

another in many ways, they do, unfortunately, have one trait in

common: Greed that exceeds their caution. Plus a willingness to

believe what they want to believe. Movie actors and athletes,

professional persons and successful business executives,

political leaders and internationally famous economists have all

fallen victim to investment fraud. So have hundreds of thousands

of others, including widows, retirees and working people--people

who made their money the hard way and lost it the fast way.

How Investment Swindlers Find (or Attract) Their Victims

Swindlers attempt to mimic the sales approaches of

legitimate investment firms and salespersons. Thus, the fact

that someone may contact you in a particular way--by phone,

mail, or even through a referral--should not in itself be viewed

as an indication that the investment is or isn't shady. Many

totally reputable firms also use the same methods to effectively

and economically identify individuals who may have an interest

in their investment products and services.

Bearing in mind that investigate before you invest is good

advice no matter how you are approached, these are some of the

methods con men commonly employ to contact their victims-to-be.

* Telephone

So-called telephone boiler-rooms remain a favorite way for

swindlers and their sales squads to quickly contact large

numbers of potential investors. Even if a swindler has to make

100 or 200 phone calls to find a mooch (one of the terms

swindlers use for their victims), he figures that the

opportunity to pocket thousands of dollars of someone's savings

is still good pay for the time and cost involved.

* Mail

Some sellers of fraudulent investment deals buy bona fide

mailing lists--names and addresses of persons who, for example,

subscribe to a particular investment-related publication, who

have responded to previous direct mail offers, or who have

other characteristics that swindlers look for. In the hope of

avoiding notice by postal authorities, mail order swindlers may

not make a direct or immediate pitch for your money. Rather,

they often seek to entice you to write or phone for more

information. Then comes a call from the salesperson or the

person who closes the deal. Some may phone even if you didn't

respond to the mailing.

* Advertisements

A newspaper or magazine ad may offer (or at least hint

at)profit opportunities far more attractive than available

through conventional investments. Once you've taken the bait,

the swindler will then attempt to "set the hook." Even though

investment crooks know that regulatory agencies regularly

monitor ads in major publications, some nevertheless use such

publications in the hope of being able to hit-and-run before an

investigator shows up. Others advertise in narrowly circulated

publications they think regulators may be less likely to see.

* Referrals

One of the oldest schemes going involves paying fast, large

profits to initial investors (actually from their own or other

peoples' investments) knowing that they are likely to recommend

the investment to their friends. And these friends will tell

their friends. Soon, the swindler no longer needs to find new

victims; they will find him. (See page 16.)

* The "Reputable" Business

Some swindlers go first class. Using profits from previous

swindles, they rent plush offices, hire an interior decorator

and professional-sounding receptionist and open what has the

appearance--but not the reality of a reputable investment firm.

You may even have to phone for an appointment, and once there

don't be surprised to be kept waiting (that's intended to make

you all the more eager). This kind of swindler's success

depends on how long he can keep his victims from knowing they

are being cheated. Investors are assured that their large

profits are being reinvested to earn even larger profits. Such

a swindler may join local civic groups, contribute to

charities, and generally play the role of solid citizen.

Techniques Investment Swindlers Use

Their techniques are as varied as their methods of

establishing contact. If there is a common denominator, however,

it is their ability to be convincing. The skills that make them

successful are essentially the same skills that enable any good

salesperson to be successful.

But swindlers have a decided advantage: They don't have to

make good on their promises. In the absence of this

responsibility, they have no reluctance to promise whatever it

takes to persuade you to part with your money. These are some

of their techniques:

* Expectation of Large Profits

The profits a swindler talks about are generally large

enough to make you interested and eager to invest--but not so

large as to make you overly skeptical. Or he may mention a

profit figure he thinks you will consider believable and then,

as a further enticement, suggest that the potential profit is

actually far greater than that. The latter figure, of course, is

the one he hopes you will focus on. Generally speaking, if an

investment proposal sounds too good to be true, it probably is.

* Low Risk

Some are so blatant as to suggest there's no risk--that the

investment is a sure money maker. Obviously, the last thing a

swindler wants you to think about is the possibility of losing

your money. (If you ask how you can be certain your money is

safe, you can count on a plausible-sounding answer. Besides, at

this point, he figures you will believe what you want to

believe.)

To make his pitch more credible, a swindler may

acknowledge that there could be some risk--then quickly assure

you it's minimal in relation to the profits you will almost

certainly make. A con man may become impatient or even

aggressive if the question of risk is raised--perhaps suggesting

that he has better things to do than waste time with people who

lack the courage and foresight needed to make money! With this

kind of put down, he hopes you won't bring up the subject again.

* Urgency

There's usually some compelling reason why it's essential

for you to invest right now. Perhaps because the investment

opportunity can "be offered to only a limited number of people."

Or because delaying the investment could mean missing out on a

large profit (after all, once the information he has confided to

you becomes generally known, the price is sure to go up,

right?).

Urgency is important to a swindler. For one thing, he

wants your money as quickly as possible with a minimum of

effort on his part. And he doesn't want you to have time to

think it over, discuss it with someone who might suggest you

become suspicious, or check him or his proposal out with a

regulatory agency. Besides, he may not plan on remaining in

town very long.

* Confidence

They don't call them con men for nothing! They sound

confident about the money you are going to make so that you will

become confident enough to let go of your savings. Their message

is that they are doing you a favor by offering the investment

opportunity. A swindler may even threaten (pleasantly or

otherwise) to end the discussion by suggesting that if you are

not really interested there are many other people who will be.

Once you protest that you are interested, he figures your

savings are practically in his pocket.

Although you can't necessarily spot a con man by the way

he talks, most are strong-willed, articulate individuals who

will dominate the conversation-even if they do it in a low-key,

friendly sort of way. The more they talk, the less chance you

have to ask questions.

Several Investment Swindles and How They Worked

There's a saying among swindlers that it's not the scam

that counts, it's the sell. Judging from the number of arcane

and often outlandish schemes that have been employed to

separate otherwise prudent people from their money, the saying

would seem to reflect reality. The evidence is that if people

can be made believers, they can be sold practically anything.

Consider several of the ways in which hustlers of phony

investments have won the confidence of persons whom they

planned to victimize.

The Old-Fashioned Ponzi Scheme

It's become one of the oldest and most often employed

investment schemes because it's proven to be one of the most

lucrative. While there are innumerable variations, here is how

a person we will call Frank C. practiced it. At the outset,

Frank approached a relatively small number of influential

persons in the community and offered them the opportunity to

invest--with a guaranteed high return--in a computer-generated

program of arbitrage in foreign currency fluctuations. To be

sure, it sounded high tech and sophisticated but Frank had his

eye on sophisticated and well-heeled victims.

Within a short period of time, he approached and sold the

scheme to still other investors--then promptly used a portion

of the money invested by these persons to pay large profits to

the original group of investors. As word spread of Frank's

genius for making money and paying profits, even more would-be

investors anxiously put up even larger sums of money. Some of

it was used to recycle the fictitious profit payments and, like

a pebble in the water, the word of fast and fabulous rewards

produced an ever-widening circle of eager investors. And more

money poured in.

And Frank C. left town a wealthy man.

The Infallible Forecaster

Jim L. (among his many aliases) had a full-time job in the

daytime, but with assets that consisted only of a phone,

patience and an easy way of talking he managed to parlay a

nighttime sideline into an ill-gotten fortune. The routine went

like this.

Jim would phone someone we'll call Mrs. Smith and quickly

assure her that, "No," he didn't want her to invest a single

cent. "Never invest with someone you don't know," he preached.

But he said he would like to demonstrate his firm's "research

skill" by sharing with her the forecast that so-and-so a

commodity was about to experience a significant price increase.

Sure enough, the price soon went up.

A second phone call didn't solicit an investment either.

Jim simply wanted to share with Mrs. Smith a prediction that

the price of so-and-so a commodity was about to go down. "Our

forecasts will help you decide whether ours is the kind of firm

you might someday want to invest with," he added. As predicted,

the price of the commodity subsequently declined.

By the time Mrs. Smith received a third call, she was a

believer. She not only wanted to invest but insisted on it--with

a big enough investment to make up for the opportunities she had

already missed out on.

What Mrs. Smith had no way of knowing was that Jim had

begun with a calling list of 200 persons. In the first call, he

told 100 that the price of so-and-so a commodity would go up

and the other 100 were told it would go down. When it went up,

he made a second call to the 100 who had been given the

"correct forecast." Of these, 50 were told the next price move

would be up and 50 were told it would be down.

The end result: Once the predicted price decline occurred,

Jim had a list of 50 persons eager to invest. After all, how

could they go wrong with someone so obviously infallible in

forecasting prices?

But go wrong they did, the moment they decided to send Jim

a half million dollars from their collective savings accounts.

All That Glitters

Not only did the two brothers have a fancy office building

with their own company name on it, but the investment offer

seemed sound and straightforward: "Instead of buying gold

outright and holding it for appreciation, make a small

downpayment that the firm could use to secure financing that

would permit much larger quantities of gold to be bought and

held for the investor's account." That way, when the price of

gold rose--as was "sure to happen"--investors stood to realize

highly leveraged profits.

The company provided storage vaults where investors could

view the wall-to-wall stacks of glittering bullion. By the time

authorities caught wind of the scheme's suspicious smell and

looked for themselves, it turned out the only thing gold was

the color of the paint on the cardboard used to construct

look-alike bars of bullion.

The counterfeit gold, however, proved far easier to find

than the millions of dollars of investors' money. Most of that

is still missing.

16 Questions That Can Turn Off an Investment Swindler

The first line of defense against investment fraud is your

inalienable right to ask questions and--until you get the right

answers--to say "No." And mean no. Not surprisingly, this is

usually an investment swindler's first point of attack. To keep

you from asking questions, he asks them! Invariably, the

questions have "yes" answers, such as "You would at least be

interested in hearing about such a fantastic investment

opportunity, wouldn't you?" or "You would like to make a large

amount of money in a short period of time with little or no

risk, right?"

One difference between a reputable investment firm and a

swindler is that reputable firms encourage you to ask

questions, to obtain as much information as possible, to

clearly understand the risks involved, and to be entirely

comfortable with any investment decision you make. The only

thing a swindler wants is your money These are some of the

questions that swindlers don't like to hear:

1. Where did you get my name?

If the response is that you were chosen from a "select list

of intelligent and prudent investors," that select list may be

the telephone directory, or a purchased list of persons who've

bought certain types of books, subscribed to particular

magazines, or responded to newspaper ads. If you have made

ill-advised investments in the past, you can be pretty sure

your name is on someone's alumni list. It's the list swindlers

prize most: Easy preys who are eager to recoup (but are doomed

to repeat) their earlier losses.

2. What risks are involved in the proposed investment?

Except for obligations of the U.S. Treasury, which are

considered risk-free, all investments involve some degree of

risk. And some investments, by their nature, involve greater

risks than others. Keep in mind that if the salesman had

knowledge of a sure-thing, big-profit investment opportunity,

he wouldn't be on the phone talking with you.

3. Can you send me a written explanation of your investment

so I can consider it at my leisure?

For someone peddling fraudulent investments, that can be a

double turnoff. For one thing, most crooks are reluctant to put

anything in writing that might cause them to run afoul of

postal authorities or provide material that, at some point,

might become evidence in a fraud trial. Secondly, swindlers

don't want you to do anything at your leisure. They want your

money now.

Accordingly, it's a good rule of thumb that any investment

which "absolutely has to be made immediately" shouldn't be made

at all. You may not always be right, but you are less likely to

be sorry.

4. Would you mind explaining your investment proposal to some

third party, such as my attorney, accountant, investment

advisor or banker?

If the answer goes something along the lines of "normally,

I'd be glad to, but there isn't time for that," or if the

salesman snaps back by asking "can't you make your own

investment decisions." these are virtually certain clues that

your final answer should be an emphatic "No."

5. Can you give me the names of your firm's principals and

officers?

Although some persons who establish and operate dishonest

firms change their own names as often as they change their

firms' names, even the hint that you are the kind of investor

who checks into things like that can be a fast turn-off for a

swindler.

6. Can you provide references?

Not just another list of other investors who supposedly

became fabulously wealthy (the names you get may be the

salesman's boss or someone sitting at the next phone), but

reputable and reliable recommendations such as a bank or

well-known brokerage firm that you can easily contact.

7. Do you have any documents such as a prospectus or risk

disclosure statement that you can provide?

This may not be available in connection with all types of

investments but in many investment areas--such as securities,

futures and options trading--it's required. And there can be

requirements that you be provided with this information and

acknowledge in writing that you have read and understood it.

Obviously, it's not the sort of information a swindler is likely

to distribute.

8. Are the investments you are offering traded on a regulated

exchange, such as a securities or futures exchange?

Some bona fide investments are and some aren't, but

fraudulent investments never are. Exchanges have strict rules

designed to assure fair dealing and competitive price

determination. There are also in-place mechanisms to provide

for rule enforcement and to impose severe sanctions against

those who fail to observe the rules.

9. What governmental or industry regulatory supervision is

your firm subject to?

If the salesman rattles off a list that ranges from the FBI

to the Boy Scouts, tell him you'd like to check the firm's good

standing before making an important investment decision. Then

verify the response. Few things discourage a swindler faster

than the thought that his first visitor the next morning may be

from a regulatory agency.

If, on the other hand, you are told his particular area of

investment isn't subject to regulation (perhaps because

everyone in his business is an ethical, upstanding citizen),

take that explanation for whatever you think it's worth. At the

very least, keep in mind that any ongoing supervision which

isn't being provided by a regulatory organization or agency

will have to be provided by you.

10. How long has your company been in business?

In any kind of business activity, there can be advantages

to dealing with a known, established company. This isn't to say

that new businesses aren't starting up all the time or that the

vast majority aren't perfectly reputable. But if you find

yourself talking with someone who doesn't seem to have a past,

it can be worthwhile to find out why. Many swindlers have been

running scams for years but understandably aren't anxious to

talk about it.

11. What has your track record been?

Before you accept a salesman's assurance that he can make

money for you, you have the right to know what his performance

has been in making money for others. And ask to have the

information (if there is any) in writing. Boasting over the

phone is one thing; putting it down on paper is quite another.

In any case, even if you are able to obtain a documented

performance record, don't lose sight of the fact that past

performance in itself provides no assurance of future

performance.

12. When and where can I meet with you or with another

representative of your firm?

Chances are a crooked operator--particularly if he is

operating out of a telephone boiler-room--isn't going to take

the time to visit with you and even more certainly doesn't want

you to see his place of business.

13. Where, exactly, will my money be? And what type of regular

accounting statements do you provide?

In many investment areas, such as futures trading, firms

are required to maintain their customers' funds in segregated

accounts at all times. Any mingling of investors' funds with

those of the firm or its principals is prohibited. You might

also want to find out what, if any, routine outside audits the

firm's account records are subject to.

14. How much of my money would go for commissions, management

fees and the like?

And ask whether there will be other costs such as interest

or storage charges, or whether the investment agreement involves

any type of profit sharing arrangement in which the firms'

principals participate. Insist on specific answers, not glib

and evasive responses such as "that's not important" or "what's

really important is how much money you are going to make." And,

again, get it in writing, just as you would any other type of

contract.

15. How can I liquidate (i.e. sell the item I'd be investing

in) if and when I decide I want my money?

If you find that the investment is illiquid, or there would

be substantial costs if liquidated, or that you are unable to

get straight and solid answers, these are all things to consider

in deciding whether you want to invest.

16. If disputes should arise, how can they be resolved?

Short of having to go to court to sue someone, does the

company or regulatory organization provide a mechanism for

resolving disputes equitably and inexpensively through

arbitration, mediation, or a reparations procedure? Aside from

seeking important information, you may be able to detect whether

the salesperson is uncomfortable or impatient with this line of

questioning. Swindlers generally will be.

Before You Invest, Investigate

Asking some or even all of the questions just suggested

isn't likely to produce straight answers from a crooked

investment promoter but, as indicated, the very fact that you

are asking such questions can be a turn-off. Bear in mind,

however, that no matter how persistently or skillfully you pose

the questions, experienced con men are at least equally skilled

in evading them, in providing downright dishonest answers, and

in refocusing the conversation on your "tremendous profit

opportunity."

Bear in mind also that, while separating you from your

money is the swindler's primary goal, the very last thing he

wants you to do is check him out. That could cause you not to

invest or, worse still, alert regulators that someone they know

well has set up shop in a new area or is running a new scam.

For this reason, most con men deliberately make themselves

difficult to investigate: By tailoring their schemes to operate

in regulatory cracks where federal or national regulatory

organizations may lack clear-cut jurisdiction; by operating in

states or communities where authorities are known to be

short-staffed or occupied with more pressing criminal

activities; by changing their names or modus operandi, by

stressing the urgency of the investment so you won't have time

to investigate; and by targeting victims who may not know how

or where to check them out.

Moreover, as described in swindle scenarios on pages 8,

9, and 10 of this booklet, con men have numerous and ingenious

ways of seeking to convince you there is no need to investigate.

For example, your friends, neighbors or business associates

invested and they made money, right? That, of course, is why

ever-popular Ponzi schemes (named after the first person to

perfect the referral technique) are so prevalent--and why you

should never make investments based on tips, no matter how

trustworthy the source.

While there is no way to know for certain whether a

particular investment will make money or lose money, there is

one thing you can be certain of: Any money you hand over to an

investment swindler is lost the moment you part with it. The

question is, how do you check out someone who is offering what

sounds like an irresistible investment offer? Here are some of

the ways:

* Find out whether the local police department or Better

Business Bureau has complaints on file.

If so, you can make your investment decision accordingly.

But be aware that the absence of local complaints doesn't

necessarily mean a firm or individual is on the up-and-up.

It may simply mean that investors haven't yet become aware

that they've been bilked. Or it may mean you will have the

distinction of becoming the first victim in town. It could

also mean that other victims have been too embarrassed to

report their losses. Regrettably, that's not uncommon.

* Make a phone call to the financial editor of your local

newspaper.

Although newspapers don't give endorsements or make

investment recommendations, they may be aware of a swindler

who is working a scam in the area--and may even have

published a warning article that you happened to miss. Then

too, if readers are being pitched with suspicious-sounding

investment offers, that's something an investigative

reporter might want to look into.

* If the investment offer isn't local, don't be reluctant to

make a long distance phone call or two.

It could be that the police, Better Business Bureau or

newspaper in the community where the offer is coming from

will be able to provide information. Again, however, even

the absence of such complaints doesn't necessarily mean the

firm is legitimate. Some swindlers--particularly telephone

boiler-room operators--try to maintain a low profile in

their local areas. That lessens the likelihood of their

coming to the attention of local authorities; it prevents

prospects from dropping by to see their operations; and it

makes it more difficult for out-of-towners to discover what

they are up to.

* Check to see if your city or state has a consumer

protection agency.

Many do. If so, there may be information there about the

person or firm that's offering the investment you are

interested in. In any case, the agency should be able to

provide names, addresses and phone numbers of other places

you can check.

* Contact regulators.

The majority of individuals and companies offering

investments to the public are subject to some sort of

regulation--and may be subject to multiple regulation.

Those which trade in futures contracts and options on

futures contracts are regulated by the Commodity Futures

Trading Commission, a federal agency, and by National

Futures Association, an industry-wide self-regulatory

organization authorized by Congress. In the securities and

securities options business, the federal regulatory agency

is the Securities and Exchange Commission. There is also an

industry self-regulatory organization, the National

Association of Securities Dealers.

The Federal Trade Commission has jurisdiction over

advertising, franchises and business opportunities. Deals

involving interstate promotion of land sales are regulated by

the federal Department of Housing and Urban Development.

By contacting the appropriate regulatory organization, you

can generally find out whether the firm or person is properly

registered to engage in that type of business and whether any

public disciplinary actions have been taken against them. A

list of some of the regulators you can check with is provided

on the inside back cover of this booklet.

* Write or phone law enforcement agencies.

Whether or not a person or firm is subject to the scrutiny

of a regulatory organization, the fact is that fraud is against

the law in every state of the nation. And if it involves

interstate commerce--including the use of the mails or phone

lines--federal criminal statutes apply. If an investment sounds

suspicious, check with the appropriate agency. They may be able

to furnish information or conduct an investigation of their own.

The following are some you could contact:

The office of the local public prosecutor, the state

attorney general, and the state securities administrator.

Someone in the local courthouse should be able to give you

names, addresses and phone numbers.

If the mails are used in promoting or operating a phony

investment scheme, federal Postal Inspectors want to know about

it. The postmaster in your community can put you in touch with

them. Fraud involving any form of interstate commerce is also

of interest to the Federal Bureau of Investigation. The nearest

office should be listed in your phone directory. The listing on

the inside back cover of this booklet includes headquarter

addresses of the U.S. Postal Inspector in Charge and the FBI.

Sure it can take some time, effort and possibly expense to

thoroughly check out an investment proposal, but if you have

any doubt about whether it's worth the trouble, talk with people

who didn't and wish they had!

Finally, Don't Lose Touch with Your Money

The need to exercise good financial sense doesn't stop once

you've decided to invest. It's possible, all your precautions

notwithstanding, that you may have turned your money over to a

swindler. It's also possible that what didn't start out to be a

swindle may turn into one if the promoter finds himself in

financial trouble or with too many poor investments on his

hands. That can lead to cover-up bookkeeping or, worse yet, a

decision by the promoter to take flight with what's left of his

customers' money.

It's important to continuously monitor your investments

and to be alert for any telltale signs that things aren't quite

the way they should be. The person who sold you the investment,

for example, may suddenly become inaccessible--continuously

tied up on the telephone or unwilling to return your calls,

busy with clients, or out-of-town on important business

matters. Or various documents or accounting statements you were

promised don't arrive. Or information you do receive is vague

or at variance from what you had been led to expect. Or money

that was supposed to have been paid to you isn't received, and

instead of checks you get excuses.

If you become suspicious or overly uncomfortable with an

investment you've made--and if you are unable to totally

resolve your concerns--the best thing you can do is try to get

out of it. And do so as quickly as possible. That means

demanding your money back, accompanied, if necessary, by threats

to contact authorities.

You might or might not get it. The best you can hope for,

if indeed there's fraud involved, is that the swindler may

decide to refund your money rather than risk having you blow

the whistle while he is still on the prowl for new investors.

If that happens, consider yourself more fortunate than most.

Be aware, if you do decide to try and get a refund, that

the person who was smooth-talking enough to get your money in

the first place will unleash all his skills to persuade you to

leave it with him. No doubt, he will have some answer for all

of your concerns. And some explanation for all apparent

irregularities. And, no doubt you will be told that backing out

now would be anything from contractually illegal to a terrible

financial mistake. Swindlers figure that every once in a while

some of their more fidgety investors simply have to be

reconvinced. He may tell you that you are so close to making

really big money, or the investment now looks even more

profitable than originally expected.

Believe him at your own peril.

If you do insist on a refund of your investment, insist on

it immediately Ask to pick it up yourself, or offer to pay the

cost of having it sent by overnight mail or wired directly to

your bank. Don't settle for "it will take a week or two" or

"the check is in the mail." As everyone knows, checks seem to

be lost more often than any other type of mail!

If you don't get your investment back (and chances are you

won't), or even if you do and still suspect a swindle, report

it promptly to the appropriate authorities and regulatory

officials. They may be able to conduct an investigation and, if

called for, seek legal action to impound whatever funds the

firm still has.

Bottom line, the unfortunate reality is that very few

victims of investment fraud ever again see a cent of their

money. It's also a reality that the business of swindling will

continue to flourish as long as unwary investors provide prey

for unscrupulous promoters. Hopefully, the information in this

booklet--if heeded--will help to assure that a swindler's next

fortune won't be made at the expense of your misfortune.

6/92

Below is a list of names, addresses and phone numbers of

organizations and agencies noted in this brochure:

Commodity Futures Trading Commission

2033 K St., N.W.

Washington, D.C. 20581

202.254.6387

Federal Bureau of Investigation

Justice Department

9th St. & Pennsylvania Ave., N.W.

Washington, D.C. 20535

202.234.3691

Federal Trade Commission

6th St. & Pennsylvania Ave., N.W.

Washington, D.C. 20580

202.326.3650

Housing and Urban Development Department

Interstate Land Sales Registration

HUD Building

451 7th St., S.W. Room 6262

Washington, D.C. 20410-8000

202.755.0502

National Association of Securities Dealers

1735 K St., N.W.

Washington, D.C. 20006

202.728.8044

National Futures Association

200 W. Madison, Suite 1600

Chicago, IL 60606-3447

Toll Free: 800.621.3570

In IL: 800.572.9400

Securities and Exchange Commission

450 Fifth St., N.W.

Washington, D.C. 20006

202.728.8233

United States Postal Service

Chief Postal Inspector

Room 3021

Washington, D.C. 20260-2100

202.268.4267

Copyright * 1987 by National Futures Association

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