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What are different types of investment frauds?

Here is a list of some common types of frauds that investors should be aware of:

  • Ponzi schemes or pyramid schemes;
    A swindler will approach a small number of people to convince them of an investment opportunity. Then the swindler widens his or her net, and uses the money received from a second group of investors to pay large profits to the original group. The original group then circulates their success with other investors, while the swindler continues to collect money, then, abruptly disappears.
  • Internet stock tips;
    Also known as a "pump and dump" scam. Swindlers send spam emails recommending that investors buy specific stock now, while the price is still low. Once investors buy the stock, the stock rises, and so does the price. The swindler will then sell his or her share, leaving investors with worthless stocks.
  • Seasonal trading in gas and oil;
    A broker will claim that there are seasonal tendencies in heating oil or unleaded gasoline and that your chances of making money are increased due to high demand.
  • Affinity fraud;
    Swindlers will target groups with common interests in an effort to increase investors trust. It is important not to let these similarities cloud your judgement.

For more information about these different types of investment fraud read NFA's brochure, Scams and Swindles: An Educational Guide to Avoiding Investment Fraud.

For a detailed list of specific industry related frauds, such as foreign currency (forex), weather-related and precious metals scams, visit the CFTC's fraud advisories list.

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