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Thread: At what point it is a scam or not?

  1. #1
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    At what point it is a scam or not?

    First off I would like to congratulate and thank everyone on board for all the interesting articles and discussions. I have looked around to see if this didn't need posting so forgive me if this was previously discussed in the past.

    Basically, I would like to know at what interest rate a return is considered a scam and why? For example, say a site offers an incredible annual return for your money of something like 50%. Would that raise any flags to you knowledgeable people? And if the reason for such high yield of return over time is due to the fact that the money manager invests wisely in commodities, bonds, precious metals, forex, etc {I mean anything} then, wouldn't that dissipate any suspicions of foul play and could actually be considered 'legitimate business' one that you would even recommend on here? Just wondering what you experts and crime fighters against crooked business would think or have to say.

    Many thanks for you comments!

    Edward V.
    Last edited by EdwardV; 02-23-2014 at 04:57 PM.

  2. #2
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    Re: At what point it is a scam or not?

    There are several things to call out a scam, outrageous HIGH profits are not the main part, you have to ask these questions:

    1. Is it legal ? Public offers of investment regulated in every country, did your local authority licensed this investment ? did anyone licensed this investment ?
    Are those licenses fabricated ?

    2. Where do they claim they based or incorporated ? Is it one of 44 offshore hideaway countries ? if it is and they want your money upfront, you better of sending it to a Nigerian prince. Incorporated comapny by itself means absolutely nothing - registering (or buying an established shelf) offshore company anonymously is easy and can be done without getting up from a computer chair.

    3. Does it have a pyramid component ? people bringing people who also bringing people get paid.

    4. Does it have presence at HYIP pimping places ? Licensed investment company would make sure criminals do not promote it.

    Of course you can also dig in details , how the promised return does not make sense,
    the best indication is: calculate how rich you would be if you deposit and compound $1k over 10 years with such investment and realize it cannot be anything but a ponzi.

    How anonymously or with misleading information the site is hosted.
    How they use the common HYIP-in-the-Box script/software to run this scam.
    And more..

    While HYIP players, insist to call a HYIP a "scam" only when it did finally scam as in ran away / stopped paying,
    as by their logic if it did not yet it is not a proven scam, we can afford to call a scam right away.
    Last edited by NikSam; 02-23-2014 at 08:52 PM.

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  4. #3
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    Re: At what point it is a scam or not?

    One of the most important questions to ask if it is in the EU is, what is the VAT registration number?

  5. #4
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    Re: At what point it is a scam or not?

    Quote Originally Posted by EdwardV
    And if the reason for such high yield of return over time is due to the fact that the money manager invests wisely in commodities, bonds, precious metals, forex, etc {I mean anything} then, wouldn't that dissipate any suspicions of foul play and could actually be considered 'legitimate business' one that you would even recommend on here?
    One of the simplest rules of investing is:

    "While there are many High Yield INVESTMENTS, there are NO High Yield Investment PROGRAMS"

    While high returns are possible, anyone who promises high returns on an guaranteed, ongoing or repeatable basis is straight out lying.

    For example:

    Generally recognized as one of the worlds' foremost investors, Warren Buffett, at one time the worlds' richest man, has produced an annualized compounded return of around 21 or 22% (depending on who is doing the reporting) beating the S&P 500 Index for 20 out of 24 months at one stage

    Buffett believes a stock investment must have a high likelihood of achieving at least a compound annual earnings growth rate of 10%.

    That is a long way from 1% a DAY offered by most HYIPs.

    Buffetts' Berkshire-Hathaway Berkshire Hathaway averaged an annual growth in book value of 19.7% to its shareholders for the last 48 years (compared to 9.4% from S&P 500 with dividends included for the same period), while employing large amounts of capital, and minimal debt.

    Buffett / Berkshire Hathaway are estimated to be sitting on $40 BILLION dollars. Definitely not some guy sitting on his laptop promising returns of 1% a day or a week.
    The only thing necessary for the triumph of evil is for good men to do nothing

  6. #5
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    Re: At what point it is a scam or not?

    Quote Originally Posted by EdwardV View Post
    Basically, I would like to know at what interest rate a return is considered a scam and why?
    Edward welcome to the thread.

    If you don't have an idea of what things should be, then any rate of return could be considered a scam. For instance, rental real estate is a real business but if a seller is trying to tell you operating expenses are 25% of rents that paints a whole different picture of cap rate than 40%. Some folks may go the other way because they have been cheating on their taxes by showing losses. Is that a "scam", I leave that to you, only to say it happens every day in all kinds of business. Too many people jump without asking if the numbers make sense.

    The hair on my neck stands up any time there is a discussion of how much money can be made in any deal before the details are worked out. Going back to real estate watch the informercials, any talk of copper pipes being stolen, Sakrete being poured in toilets, evicting tenants, folks "slipping" on the stairs? Too much happy talk is probably a sales pitch and should be treated as such.

    In my opinion a legitimate business requires a product or service that people need/want and will pay for. Supported by some infrastructure that enables the owner to deliver it to them. What I see online, falls into three buckets:

    1. Endless Chain Recruiting as LRM affectionately calls it.
    2. Overpriced training programs, often coupled with 1.
    3. Also-ran products that you can sell, often coupled with 1.

    I don't consider any of these to be worthwhile opportunities unless you want to spend all your time recruiting. Could you make some money setting up a website and selling a real product? Sure, but you are likely not going to be putting up your feet and collecting residual checks unless you have something truly unique. I would call most scams, if for no other reason than you are overpaying for a commodity business under the guise of how little work you will have to do.
    "It's virtually impossible to violate rules ... but it's impossible for a violation to go undetected, certainly not for a considerable period of time." Bernie Madoff
    https://www.facebook.com/pages/Scam-...98399986981403

  7. #6
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    Re: At what point it is a scam or not?

    Quote Originally Posted by EdwardV View Post
    Basically, I would like to know at what interest rate a return is considered a scam and why? For example, say a site offers an incredible annual return for your money of something like 50%. Would that raise any flags to you knowledgeable people? And if the reason for such high yield of return over time is due to the fact that the money manager invests wisely in commodities, bonds, precious metals, forex, etc {I mean anything} then, wouldn't that dissipate any suspicions of foul play and could actually be considered 'legitimate business' one that you would even recommend on here? Just wondering what you experts and crime fighters against crooked business would think or have to say.

    Edward V.
    This is part II as it would appear you are looking at a passive investment as opposed to a business. Am going to make three assumptions, that you live in America, are NOT an Accredited Investor, and are NOT being approached by a Stockbroker (or similar). Although as was mentioned almost all countries have similar laws.

    "General Solicitation" of investments is ILLEGAL unless it is made to Verified Accredited Investors. If the 3 above apply, almost anything you are approached with in the form of promissory notes, loans, private placements, whether offshore or not are considered INVESTMENTS and must be registered and solicited as such. If this is missing, me personally I would consider it a scam.

    *One other thought on that is I would NEVER put my money where I could not independently verify where it is. A lot of these folks want you to write them a check and they provide the statements of how great you are doing. Bullshit on that, if you can't call a major bank or brokerage where your funds are held separately you are asking to be fleeced.

    https://www.sec.gov/answers/accred.htm
    General Solicitation Ban Lifted Today - Three Things You Must Know About It - Forbes

    ==============================================

    Rate of return is a meaningless number unless you factor in risk. The S&P 500 a completely unmanged grouping of stocks returned 30% last year. Had someone doubled their investment by using margin (borrowing to buy) they would have returned 60%. Had they used pyramiding, futures, or options maybe 200%. But is that person a genius, or a f-ing idiot, and how do YOU know?

    This guy manged money for a lot of years with remarkable returns, and then blew up, investors were wiped out. Not only that, he made a comeback, want to guess how that ended?

    Victor Niederhoffer - Wikipedia, the free encyclopedia

    This guy was well on his way to being the richest man in the world. Speed and leverage can kill.

    Eike Batista - Wikipedia, the free encyclopedia


    As is often said, "past performance is no guarantee of future returns" and there is no convincing evidence I have seen to disprove that. Clearly there are people that will outperform the market, some by large numbers. But how do you know, really know who they will be?
    "It's virtually impossible to violate rules ... but it's impossible for a violation to go undetected, certainly not for a considerable period of time." Bernie Madoff
    https://www.facebook.com/pages/Scam-...98399986981403

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