Everyone in the business world wants to make money. Most people do it through starting their own Parsippany car service and working their way up in the world, but there will always be people who think it's easier to simply take other people's money instead. When you're looking into investing in another business or getting involved with a venture capitalist, the fact that your deal has the potential to be a scam should never be far from your mind. Here are some common scams to watch out for.
Pyramid Schemes
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Pyramid, also known as Ponzi, schemes are as old as investing itself. In the old days they were supported by mail order or TV offers, but today are primarily circulated through the internet. In this type of fraud, when you invest in the "business" your money is used to pay off the first investors. Once the scammer has gotten the owner of collision repair Saskatoon to invest as well, his money will pay your dividends. Eventually the whole thing collapses when the scammer can't find any more investors and absconds with the ill gotten gains.
Manipulating Stock Prices
As a business owner, you can get caught on either end of this scam, where a fraudster spreads lies about or recommends a small company to a lot of people, causing a spike or fall in stock prices that the scammer can take advantage of. The fraudster then pockets the money he made off the scheme and disappears to a Puerto Vallarta vacation rental, while the investors are out the amount they invested in company stock and the company is left to deal with the damage to their reputation caused by the mess.
Offshore Investing
This is a variation on an extremely common email and online classifieds purchasing scheme. In it, an investor or venture capitalist in another country offers to invest in your company. They may even claim to be connected to some mortgage brokers in Toronto that you know, create a false persona for themselves, or appropriate the name of a trusted investment group. They will then send a cheque for more than they plan to invest and ask you to wire back the overage. By the time the cheque is revealed to be fake, your money is gone.
Charm and Run
If you're a wealthy investor or venture capitalist, business owners may approach you directly with a pitch while you're out getting tax services in Toronto or at a trade dinner. They may seem very personable and professional, have a solid business plan and good credentials that make them seem like a good bet. However, once you make your investment they disappear with it and it only comes out later that the identity they were using is fake.
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