Posted by: gulfcoastwestern | March 25, 2010

Gulf Coast Western Initiatives Against Fraud Complaints

Gulf Coast Western wants to make sure that investors are protecting themselves against the following scams and frauds:

Ponzi Schemes

This is where someone collects money from a new investor only to use it to pay the supposed returns to an earlier investor, instead of investing the money as promised.  It was named after Charles Ponzi, who in the 1920’s conned thousands to invest in a complex scheme involving postage stamps.  Ponzi schemes tend to collapse when they can no longer attract new investors or when too many investors attempt to get their money out- for example, during turbulent economic times.  Madoff would be an example of this kind of fraud.

Pyramid Schemes

The attraction is that you can turn a small investment into large returns within a short period of time; however the participants make money solely by recruiting new participants into to the program.  The money is made by recruiting new participants. Therefore, for everyone who makes money, someone else loses money.   They very often look like legitimate multi-level marketing schemes but the money is not made by offering a product or service.  When new partners can no longer be recruited to sustain the pyramid, the pyramid collapses.

Offshore Scams

Perpetrated by individuals in other countries targeting U.S. investors; they often include a story where a large sum of money needs to enter the U.S. and the targeted investor will be paid a large commission for assisting that foreigner.  The investor pays what appear to be legitimate transaction fees and other charges with the anticipation of a large payout that never comes.  Offshore scams can take a variety of forms and can be very difficult for U.S. law enforcement agencies to investigate.

How to protect yourself

* Be aware of guaranteed returns
* Be aware of promoters that tell you- “there is no risk,” and “this must be kept a secret.”
* Be aware of non-detailed track records.
* If an investment appears to be too good to be true – it probably is.
* Be skeptical of promises of exceptionally high returns without risk.  Generally, the higher the return potential, the greater the risk.
* Beware of promoters that will not answer your questions.
* Don’t invest if you do not understand the risks involved.
* Don’t invest if you can’t afford to lose the investment.
* Read the prospectus, information memorandum, or other offering document.