Finance 8. Inside information A fairly common angle for scammers to work involves some sort of “inside secret” that’s not normally accessible to the average investor. This kind of positioning is effective because many people assume that the key to investment success comes down to privileged information − information which you can act on before every other investor has it. If you see some kind of marketing material or messaging which suggests that the opportunity will allow you to “profit like the pros,” “invest like an insider” or “take advantage of industry secrets,” it’s a sign that the opportunity may not live up to the hype. 9. Exclusivity Many frauds have the aura of exclusivity − the idea that the opportunity is being presented only to a small group of “special” investors who are “in the know” or “in front of the curve.” Such positioning plays to the victims’ egos, making them feel smart, privileged, honoured or otherwise “better” than average investors. Don’t fall for this puffery. If you come across an opportunity that screams “exclusive,” or flatters you for being part of a select group of “special” investors, make sure to do some digging before you jump in with both feet. This can be a big warning side of fraud. 10. Locked exits It’s pretty simple: once a fraudster has your money, he doesn’t want to give it back. That’s why many fishy investments have clauses that make it darned-near impossible for you to extract your investment once you put your money down. Don’t get us wrong here: not all “locked-in” investments are scams. Bank-offered GICs and similar certificates of deposit often have lockup periods during which you won’t be able to access your money. Andmany sophisticated hedge funds and private equity deals have lockups too. But, if you find yourself faced with an opportunity that requires you to “lock in” your investment for a significant period of time, it’s best to take a closer look. It could be legit − or it could be fraud. CSANews | WINTER 2020 | 31
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