Investment scams have been going on for ages, where fraudsters loot people for decades, and most of them are unaware of such scams because of the fraud documents provided by the scammer. In this article, we will cover the biggest investment frauds and how they looted people over time. We will cover a list of fraudsters who were listed in the famous investment frauds, and along with that, we will list down the schemes used by the fraudsters to dupe people.
Investment frauds are common these days because of the gradual growth of social media.
The con artist took advantage of people on social media because they could reach a large audience on social media by using advertising. Earlier, they used to reach out to people through cold calls or by marketing their business through hoarding, media, or posters.
We have a history of fraudsters who looted people for over a decade and made their fake multi-billion dollar companies; some made fake businesses by attracting investors, while others were involved in manipulating the stock market. Fraudsters made their way out to exploit innocent people and lure them into their scams.
Investment scams are highly practiced by fraudsters, as they target people in the older age group or people who are looking to invest. They generally reach out to people by offering them some goodies or by offering them a fake deal where they can earn high interest.
There are some cases where people were duped by getting under instant pressure from the fraudster. Con artists use their tactics to pressure people by not giving them much time to think over their decisions. But with the growth of social media, scammers sought an advantage and used social media to lure people into scams.
Recent investment Frauds have a greater impact on social media because it has increased their reach, and without any effort or investment, they can easily target their audience. You can also observe the increase in scams on social media, where every age group is represented.
As social media has become an essential part of our lives and people make their living with the help of social media, like influencers, youtubers, and more, with its numerous advantages, there are people who exploit the platform and make people fall for scams. They lure people into their scam by being generous and kind in the initial stages, then accelerate and make them invest.
But as of now, fraudsters have targeted crypto exchanges more, and as on social media, they target individuals, and an estimate of millions of dollars of losses is made out of it. It becomes tougher to track such scams, as it can take a good amount of time to trace fraudsters. I’ll list some of the most famous investment frauds of all time. Most of them are from the early 20s or late 90s, as these scams were running for decades and were caught after a brief period.
The following is a list of the most famous scams of all. These scams were declared successful businesses, and at some point some of them were part of the Standard and Poor’s 500. Yet, being frauds, they were taken down, as people lost billions of dollars in such scams, and according to the FBI's 2022 internet crime report, people lost over $75 million this year.
Jordan Belfort was one of the biggest fraudsters and the prime suspect in the pump-and-dump scam in 1998. He was caught off guard by an FBI agent, and he pleaded guilty and was sentenced to 22 months in prison with a $100 million fine imposed on him. Jordan and his partner looted around $200 million. His partner has served over 39 months in prison. The corporation run by Jordan was shut down, and his properties were seized by authorities.
Charles Ponzi was the one who started the famous Ponzi scheme. Following in the footsteps of the pyramid scheme, Ponzi made investors invest their funds in his fake business of IRC, or International Reply Coupon. In this scheme, he convinced the investors by guaranteeing higher returns at low risk.
He promised 50% returns in 45 days and 100% returns in 90 days to the investors, and he claimed that he has a vast network. He targeted the people who wanted to earn quickly, and he did provide the returns to the early investors, but the returns were from the funds provided by the new investors. His scam didn’t last for long, but he defrauded more than $20 million, which is currently more than $250 million.
Michael de Guzman attempted thebiggest investment fraudin the mining industry. He claimed that he found gold in the jungles of Borneo, because of which his company's stocks were increasing gradually. He was from Bre-X Minerals, and the stocks jumped from $1 to nearly $300 in no time as his analysis report was published. The shares of the company were nothing but penny stocks, but because of the scandal, their valuation rose to $6 billion.
De Guzman used the technique called "salting" to get genuine results; he shredded enough gold from his wedding ring and spread it over the samples with proper calculations in the first test. The government of Indonesia was suspicious, as they intervened and invited other miners to the site. After that, other mining companies were involved, but there were no gold flakes found, and it turned out to be the biggest mining scam of all time.
Joseph Nacchio scammed people and attempted a $3 billion fraud. He practiced insider trading and financial fraud. He was convicted of 19 counts of insider trading after the SEC won the long battle in 2007 and sued the company Qwest.
Nacchio was in prison for four years, and he was ordered to return $52 million he earned from illegal stock trading. In addition, a $19 million fine was imposed on him.
Bernard Madoff, or Bernie Madoff, is known for the biggest ponzi scam of all time, which he ran for over a decade and a half. It was the largest scam because he looted over $64 billion from the investor. The scam was huge and came into the limelight after a long period when whistleblower Harry Markopolos teamed up with GE.
Bernie Madoff was convicted of many crimes and sentenced to 150 years in prison. He and his wife tried to commit suicide in 2008. As of now, they have recovered around $14 billion, and all the properties of Madoff are being seized by the government to recover the funds.
Fraudsters attempt scams, but they lead the way with proper structure; they follow a particular scheme to dupe people. The most famous schemes used by the fraudsters are as follows:
In the Pump and Dump scheme, fraudsters like Jordan Belfort took advantage of innocent people and targeted them to buy penny stocks in bulk, which they later used to manipulate the market so they could earn a good profit from it. They use methods like cold calling and sending messages on the answering machine to grab the attention of investors.
Once they had all the investors' funding in for stocks, it resulted in pumping. In such a scenario, the fraudster usually holds the majority of shares, and after a few days, the con artist sells all his shares at a higher rate, making a good profit, and the price of the shares falls sharply, making the value of the stocks worthless.
The Ponzi scheme, named after the fraudster Charles Ponzi, is used by many conmen; the biggest fraudster of all time, Bernie Madoff, used a ponzi scam to loot people for a couple of decades.
Here, conmen use this to lure investors to their scheme or business, convince them to invest in their idea, and assure them of a higher return with low risk. They even used to pay out old investors with money raised from new investors, which encouraged more investors to invest in their scheme. However, their con will be discovered quickly if the new investors stop coming.
In affinity frauds, frauds are happening in religious groups, ethnic groups, and others. The con artist tries to get into such groups and is involved for a good period of time. They generally pretend to be members of the group. The fraudster bonds with the members of the group and wins their trust.
After some time, the fraudster tries to convince the leaders and members of the group to invest, which can be beneficial for the group. By making such moves, they scam groups and communities and flee with all the funds.
When a fraudster gets into contact with any investor, they try to convince them that they can get the best deal with high returns at a low price, and if the investor is convinced, they will immediately ask for advance fees. They will list this fee as commission, tax, or anything else.
They will pressure the investor to answer immediately, or else the deal is off. In such situations, mostly investors pay the upfront fees, and they want to sign up for the deal.
Winding up the article, I hope the article will help you out with scams. Investment fraud cases are increasing at a rapid pace, and for your safety, you have to be vigilant. If you observe any suspicious activity, you can immediately contact law enforcement, and they will help you out in recovery of lost funds efficiently.