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Provided by the Oklahoma Securities Commission and the University of Oklahoma OUtreach
The Pyramid Scheme:
Though some multilevel marketing plans are legitimate businesses,
Pyramid schemes are illegal.
Illegal pyramids promise a commission for people recruited to
join the scheme. Avoid becoming a victim by avoiding any plan that:
offers you any kind of compensation to recruit or introduce others into the plan; asks you for cash up front to join; or pressures you into buying goods, services or intangible property.
Contact the Consumer Affairs Department of the attorney general’s
office if you’re unsure whether a multilevel marketing plan is legitimate.
The Ponzi Scheme:
Named after a noted swindler from the 1920s, the Ponzi uses an
investor’s money to pay off previous investors.
An investor is asked to buy in to a high-yield business venture. The
collected money is used to pay off promised profits to earlier participants, some of whom,
smelling a sure thing, often reinvest, only to see their money gone for good.
Penny stocks:
Penny stocks typically sell for less than $5 a share. A low price per
share may be your first warning sign. Often the stock is for an unproven or nonexistent company,
service or product and often are identified as blank check or blind pool offerings.
The promoter may sell the penny stocks by artificially pumping up the price, then dumping their
shares for a profit, leaving everyone else with worthless stock.
Read a prospectus before making a purchase decision. If there is little or no information or
history, buyers beware.
Boiler rooms:
In a boiler room, several con artists sit around a real or virtual
telephone bank and call people with offers of a “hot” stock opportunity or penny stocks of
various startup companies. Typically these calls come with intense pressure and a sense of
urgency.
Oklahomans have lost thousands of dollars to these scams, so be
leery of unsolicited calls offering outlandish securities deals. Never give account information
over the phone to an unknown company, or be afraid to hang up.
Prime bank scams:
These scams deceive potential investors by suggesting top international
banks are part of an investment opportunity, usually reserved for the “very rich”, promising
“high-yield” returns. Pitches using those terms, as well as “roll program,” “in escrow” or
“guaranteed return” should be viewed with extreme suspicion.
For more information, listen for the Investment Minute on your
local radio station or visit the Invest Ed web site at www.investedok.org.
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Web site Design/Development/ Flash: Malinda Brown,
Center for Independent and Distance Learning