How to spot an investment scam

Mr Tan

This article may be useful to some of your readers from the UK FSA . It also points out the issues with prosecuting overseas fraud and why recovering funds is very difficult. I think a key question for an investment scheme should be who is independently auditing on an annual basis and what are they auditing. http://www.fool.co.uk/news/investing/2009/04/30/transcript-how-to-spot-an-investment-scam.aspx

I was disappointed that he didnt mention land banking but did feel that this quote represents the issues with many investments (stock scams, ponzis, land banking, oil etc) where big returns are offered annually (Minimum 12% return etc). Most people lose of the actual money and just see numbers on a statement or page.
David:

It strikes me that the guys who actually get in early are the ones who are going to make the most amount out of it.

Jonathan:

No, because what actually happens is, normally the con man is good enough to convince the first guys to leave their money in, and that normally happens, they might take out a bit of interest, but essentially they leave their money in as well, and what everybody sees is a paper profit; we see the conmen, they'll give a fancy spreadsheet, they'll open up a laptop, show a graph, and say, "That's what your money was at the beginning" (pointing to the low point of the graph) "and that’s what your money is now" (pointing to the high point of the graph), it looks fantastic.

Steve