Another Day, Another Ponzi Scheme in Boca Raton

A few years ago, a client called to ask me about an ad she saw in the local paper.

It advertised an amazing 8% “safe” return on an investment that was touted as being as reliable as certificates of deposit, even though CDs at the time were paying only about 1%.

“How is that possible?” the client asked. She meant not only how can the investment achieve such a high, guaranteed rate of return, but also how can they advertise such a thing if it’s not true?

“I don’t know,” I answered on both counts.

Finally, I think we know the answer.

According to Financial Advisor magazine, the Securities and Exchange Commission (SEC) has reportedly charged a Boca Raton-based firm with defrauding 8,400 ‘Main Street’ investors in a fraudulent billion-dollar scheme.

While the firm owner enjoyed chartered private jets and luxury real estate properties, investors were allegedly scammed out of their hard-earned money.

The SEC claims that investors’ money was used to funnel $64.5 million in commissions to sales agents – many in Boca Raton – who pitched the fake investments offering 5 to 10% in interest as “low risk” and “conservative.”

Folks, let’s not forget the fundamental rule of investing. There is no such thing as a free lunch.

Repeat after me. When comparable investments pay 1-2%, there is no such thing as an 8% “safe” return. Anyone who offers you a deal like that is trying to scam you.

Here are some other tips to keep you safe:

♦ Do your homework to make sure you are dealing with trusted and reputable advisors. SEC reports suggest a little research might have raised several red flags for investors.

♦ Run, do not walk away, when you are being pitched investments by heavily-commissioned salespeople. The headline in Investment News reporting on the scam says it all: “Massive investment fraud fueled by slick marketing, hot dinners.” Don’t sell out for something as puny as a fancy steak dinner.

♦ Still not sure if an investment or salesperson is legit? Be smart and get a second opinion from a professional you trust. They might raise questions or additional issues you overlooked. The opinion means more if it comes from a fee-only fiduciary who’s objective, unbiased, and not compensated by sales commissions.

Click here to read “Why your advisor should always be a fiduciary”

About Mari Adam

Mari Adam, Certified Financial Planner™ has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!

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