An investment opportunity that sounds too good to be true probably is. The Manitoba Securities Commission’s Investigation department looks into all types of scams throughout the year and takes a proactive approach that shuts down scams before they even get started.

Ponzi / Pyramid Schemes

• The promoter promises investors high returns such as 15% per month.
• They operate by paying interest to early investors with money being brought in by new investors. These later investors are attracted by the stories of people claiming to be getting high returns.
• Inevitably the Ponzi/Pyramid collapses as the number of new investors ask for their principal money back.
• In the end, investors lose their money
  
  
  

Nigerian Schemes

• An illegal and fraudulent scheme which involves an author sending a letter or e-mail to a business or personal address.
• The document is very professional, sent on letterhead and it details the author’s credentials and encourages any interested investor to contact him by phone or fax.
• They often originate from Nigeria or some other African country.
• The document either promises high returns (e.g. 30% or more) and that the individual should send money, or asks for banking information so that the author can send money and hide it from his government.
• People who invest lose their money.
• The author may also commit fraud by using your banking information.

Prime Bank Schemes

• Investors are asked to contribute funds to use in the purchase and sale of Letters of Credit or Prime Bank Notes.
• They are told that by buying and selling these instruments on a quick turnover basis, they can earn up to 2% per week.
• Investors are told that this type of investment is a secret within banking firms and that they should keep all information confidential.
• The promoters explain that the money is invested offshore and they present investors with a complicated Information Document, which gives the impression that the scheme is legitimate.
• In the end, people lose their money.

Affinity Group Fraud

• Many scam artists will use victims’ religious or ethnic identity to gain their trust knowing that it is human nature to trust people who are like themselves.
• They pray with them, volunteer and attend social events for that particular group.
• They convince people to invest in their scheme promising high returns.
• Of course, once they get the money they take off, never to be seen again.

Unlicensed People Selling Securities

• Quite often people approach individuals about an investment which is legitimate.
• However, they may not be licensed to sell the investment and therefore are probably not knowledgeable enough to inform you about all of the risks involved. To verify that a person is licensed and registered to sell securities, contact the Manitoba Securities Commission.

Pump and Dump

• “Pump and Dump”involves anonymous people talking up a thinly traded stock (which they own) on Internet chat groups quoting supposed ‘insider information’.
• People buy into the hype and start buying the stock and its value shoots up.
• The original promoters sell their stock at the inflated price and the stock price soon drops back to normal.
• The rest of the group is left holding stock that is worth far less than they paid for it.

Locked-in RRSP Scams

• A promoter advertises that his company has found a loophole in the tax law which will allow you to access your locked-in RRSP funds tax-free.
• You are instructed to place money in a self-directed RRSP and buy shares in this or another company.
• The company then lends or gives you 70% to 80% of the share price and keeps the remainder as a fee.
• You do get some money up-front, but this transaction will be considered an RRSP withdrawal and is subject to income tax.
• If the monies were lent to you, you owe the company a debt and they could require you to repay it. Also, if the company goes bankrupt, the receiver could require you to repay the debt immediately.
• Also, these shares are usually in a worthless shell company and have no value.

Link to Investor Alerts if you would like to know more about illegal activities that present a risk to the general public.