How to Avoid Becoming a Victim of Financial and Investment Fraud in Iowa

People who are looking to make money through investing are sometimes led astray by shady businesses, deceptive salespeople, false advertising or misleading descriptions of business opportunities. One type of scam that consumers are being warned about is a Ponzi scheme, which is a type of Iowa financial fraud.

What is a Ponzi scheme?

A Ponzi scheme was named after Charles Ponzi, who led one of the biggest financial and investment fraud schemes of the 20th century. In the last few years, consumers have been made aware of this scheme due to the actions of Bernie Madoff, who took investors for approximately $65 billion. Another noteworthy scam led by Allen Stanford took place soon after Madoff's scheme came to light. Stanford collected over $8 billion from investors within one decade.

Like most scam artists, they attract investors through deals that are too good to be true. Investors are promised abnormally high profits. In reality, consumers are placing their money in a fraudulent investment and no investment is actually ever made. Investors are paid from subsequent investors, and the system eventually crashes because investors are not receiving the money they were promised, or the scam artist takes off and disappears with all the money.

What to Watch Out For to Avoid Becoming a Victim of Financial Fraud in Iowa

In a Ponzi scheme, scam artists will promise an investment too good to be true. If someone promises an investor that they will receive an abnormal rate of return, a red flag should be raised. Sometimes, investors aren't promised too high of a rate of return because the scam artist knows that he has to make it believable. Investors could be promised just enough so that it is worthwhile to them without being unreal.

The next thing to watch for is that the investor claims to have some type of inside information an opportunity that is not available to the general public. The investor may have an explanation as to why he can achieve these rates that others do not have access to.

Ponzi schemes can also be started by someone trusted who has a good reputation. This was the case in the Bernie Madoff Ponzi scheme. He was in the legitimate investment business for several decades and was even the chairman of the board of directors of NASDAQ. It is important to keep in mind that just because someone has a good reputation does not mean they couldn't turn to fraudulent activities.

If you have been a victim of financial fraud in Cedar Rapids or investment fraud in eastern Iowa, you should talk to someone who is skilled in consumer and financial fraud issues. The experienced Iowa financial fraud attorneys at the law office of Brady Preston Gronlund will be happy to answer your questions in a free legal consultation when you call them at (319) 866-9277.