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How to Spot Illegal Investment Activity

I receive all types of information from State regulators. I mostly read about the ponzi schemes, the fraud, illegal activity, etc. There are two things that amaze me. First, the sheer number of scams that are occurring and have been occurring for years. You need investors to pull off a scam and there are many people who are falling for them. Second, the similarities of these scams. They mostly lead with the same benefits. This scam (LINK) involves an ex-NFL football player. It appears that they were running a ponzi scheme where they take investor money and live off of it. If you can recognize these characteristics, you will always one up the scammers.   Here are the charges: Robertson and Vaughn, the complaint said, targeted unsophisticated senior citizens and former football coaches, donors, alumni and employees of schools Robertson had attended and induced them to buy Cavalier's promissory notes that allegedly paid a fixed rate of return between 10% and 20% annually.

note: the majority of scams promise outrageous guaranteed returns in the form of promissory notes.

The SEC complaint said the men portrayed themselves as experienced investment experts and Cavalier as a sophisticated company with various divisions, investment funds and investment advisors, falsely claiming that Cavalier used investor money to invest in a broad range of business ventures, such as restaurants, real estate, alternative energy and assisted living facilities.

note: Most scams are run by people masquerading as advisers when in fact, they aren't even registered. Further, they sell and promote investments that are not even registered. They also claimed that Cavalier's investment portfolio was “secured by tangible assets that yield higher returns than investments while providing safety and security for our investors,” the SEC alleged.

note: Pretty common is the claim that the investments are backed by hard assets to make it more enticing.  

Just be aware that there are many scams occurring and as an investor you have to be careful. Use common sense when the scammers are pitching their scams. You can usually spot them a mile away!