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Ponzi schemes

A Ponzi scheme attracts investors by offering guaranteed and unusually high returns, based on short-term and often complex investments. However, the underlying investments don’t exist. Returns are paid to the initial investors from the funds of subsequent investors, rather than from any actual profit earned. The perpetuation of the scheme requires a continued stream of money from new investors.

Tips to Avoid a Ponzi Scheme:

  • Beware of claims of guaranteed investments with above average returns;
  • Ensure that you receive detailed written information to fully understand and assess the underlying investment details;
  • Assess the promoter of the investment and do your homework, i.e. background check, are they licensed to sell securities - if they claim they are exempt, check with the local regulator; and
  • If you have already invested and you are pressured to reinvest your returns, or there is a disruption of services by the promotor, contact the local regulator.

Always take the time to thoroughly review and evaluate a plan and the promoter before investing in it.

Investing with Care

Minimize the risk of encountering potential fraudulent activity when you make investment transactions.

  • Be wary of "get-rich-quick" offers and "hot tips"—you may stand to lose much more than you'll gain.

  • Only buy from institutions you trust.

  • Avoid investments you are uncomfortable with or don't understand.

  • Never make investment decisions under pressure.

  • Although many investment transactions are conducted by phone or online, be cautious about investment companies without established premises or offices. Scrutinize the investment carefully if you're asked to send money to a post office box, and independently verify the legitimacy of the company.

  • Do not respond to unsolicited email about investments, job offers or any requests for personal information without independently verifying the contents of the email or phone call.

REMEMBER—if something sounds too good to be true, it probably is!

Email & Website Fraud

Learn more about protecting yourself from email and website fraud. Visit our Phishing Resource Centre.