Bad times bring scams. Lately, I have heard of the return of the prime bank instrument fraud now draped under the banner of the bad bank paper being sold in the United State. The lawyers’ insurance company has also circulated warnings of a scam occurring where someone hires a lawyer to paper over an equipment loan transaction and uses the lawyer’s trust accounts to clear fraudulent certified cheques from fictitious lenders to fictitious borrowers.

Our collective sense of desperation, greed and our innate longing to find the silver bullet solution to all our woes, financial or otherwise, makes us easy marks. But most scams share common characteristics. While taken alone they may not amount to much, together, they could be a sign you are being sold a scam.

1. What’s being sold is shrouded in secrecy. The prime bank instrument fraud is premised on some secret trading platform the Federal Reserve or the Treasury Department approves of and now you can be a part of this elite group. Madoff was infamous for selling his ponzi scheme as a secret club. In an age of the internet and tabloid journalism, there are few, if any,  secrets left. If a magazine can obtain Secretary of Defense briefing notes to the President  from 2003, nothing is a secret.
2. You have to buy now. Scams are like the Hong Kong tailors that visit North American- buy now or its gone! The faster they push you to buy for no real reason, the more suspicious one should get.
3. Disclosure is murky or relies upon “government agencies” you never heard of. Authentication is based on government agencies you have never heard of or sound similar to existing agencies. The Securities and Exchange Commission is turned into the Commission of International Securities and Settlement.
4. Lots of name dropping. No, you are not being picked up by a leisure suit Larry at a bar. Excessive name dropping while selling you an investment is a bad sign. There are still many professionals who keep a tight lip on their clients’ affairs. Someone who tells you who is buy what is either a professional you don’t want to hire or could be running a scam and cloaking it in name dropping.
5. Way too much jargon and double-talk, inability to speak to the precise details or they make you feel stupid that you don’t know about it. If the product is vastly complicated to explain and they make you feel stupid when you ask for detail (“everyone knows that the Commission of International Securities and Settlement endorses double-shorting of zero coupon l/c’s), its either a bad legitimate investment (see ABCP) or a scam.

Be aware. Ask lots of questions and take your time.  Rules to adhere to in any investment. Good luck.