SCAMSthe untold story

Last Week

• Talked about being a good consumer

• Smart shopping tactics• Understanding Marketing and

Advertising tactics

Now let’s talk about SCAMs

• Ripoffs• Schemes• Fraud• Crimes

Did You Ever Hear the Ol’ Saying. . .

• What you don’t know won’t hurt you?

• THIS IS NOT A GOOD SAYING. . .

Another Ol’ Saying

• “There’s a sucker born every minute!”

• P.T. Barnum

Another Ol’ Saying

• If its too good to be true. . .• It probably is!

Learn a Little Latin

•CAVEAT EMPTOR• Anyone. . . • Anyone. . . • LET THE BUYER BEWARE!

Pyramid Schemes

Pyramid Schemes

• A fraudelent system of making money which needs an endless stream of recruits

• You pay a relatively small amount of money to a few people above you, with the expectation that later, very large numbers of people will be making similar payments to you.

• "Last one in is a rotten egg!"

Pyramid Schemes• As the pyramid grows below you,

here's what supposedly happens: • The first level below you has ten people. They each send you a

dollar, so you collect $10.

• The next level has a hundred people. (Each of your first ten gets ten more.) You collect $100.

• The next level has a thousand people. You collect $1,000.

• The next level has 10,000 people, so you collect $10,000.

• The next level has 100,000 people, so you collect $100,000.

• The next level has 1,000,000 people, so you collect $1,000,000.

• At this point, your name drops off the list, and you collect no more

A Graphical Depiction

1 - 1

2 - 4

3 - 16

4 - 64

5 - 256

How it works

• The recruiter explains the “amazing moneymaking potential”

• A recruit is asked to give a sum of money to a recruiter

• The recruit then becomes the recruiter, enlisting 10 more people and getting money from them using the same pitch

Also. . .

• They’ll tell you its not a pyramid scheme

• “You’re not joining a pyramid scheme, you are joining an investment club!”– I’ll give it a nice name like the

freedom investment club or something

Also. . .

• I’ll reassure you that the club is approved by the IRS, and run by a CPA. . .etc.

• I’ll tell you anything you want to get you to give me your money.

• I’ll tell you that you are getting in early

• You must have to be really dumb to get involved in a pyramid scheme right?

• Wrong!

PONZI Schemes

PONZI Schemes

• Named after Italian immigrant Charles Ponzi

• Ponzi scammed millions out of people with his scheme in the 20’s

• “Robbing Peter to pay Paul”

• He scammed people put of $9.5 million -- in 1920!

• (he spent 11 years in jail)

How Ponzis Work• A Ponzi scheme is an investment

scheme in which returns are paid to earlier investors…

• out of money paid into the scheme by newer investors

How Ponzis Work

• Collecting money from new participants and using this money to pay off promised returns to earlier participants

• Eventually when he gets enough money, he takes off

CHAIN LETTERS

LITTLE JESSICA STROM IS SEVEN YEARS OLD AND IS SUFFERING FROM AN ACUTE AND VERY RARE CASE OF

CEREBRAL CARCINOMA. THIS CONDITION CAUSES SEVERE MALIGNANT BRAIN TUMORS AND IS A TERMINAL ILLNESS. THE DOCTORS HAVE GIVEN HER SIX MONTHS TO LIVE.AS

PART OF HER DYING WISH, SHE WANTED TO START A CHAIN LETTER TO INFORM PEOPLE OF THIS CONDITION AND TO SEND

PEOPLE THE MESSAGE TO LIVE LIFE TO THE FULLEST AND ENJOY EVERY MOMENT, A CHANCE THAT SHE WILL NEVER

HAVE. FURTHERMORE, THE AMERICAN CANCER SOCIETY AND SEVERAL CORPORATE SPONSORS HAVE AGREED TO DONATE

THREE CENTS TOWARD CONTINUING CANCER RESEARCH FOR EVERY NEW PERSON THAT GETS FORWARDED THIS MESSAGE. PLEASE GIVE JESSICA AND ALL CANCER VICTIMS A CHANCE.

• Do you want to make money!!!!!!!!!!!!!!!JUST TRYPrint this messageAll you need are:6 stamps6 US$ 1 banknote

• YOU HAVE NOTHINGS TO LOOSE• FIRST:

Take 6 paper sheet and write down this message on each:PLEASE ADD ME TO YOUR MAILING LISTUS$ 1 DOLLAR PROCESSING FEE ENCLOSED

• than take US$ 1 banknote and insert one inside each paper sheet you have prepared, insert all 6 sheet+US$1 in 6 envelop( from the envelop you don't have to see the banknote).Now you have 6 envelop closed with your name, address and possibly your e-mail on.You are creating a NEW SERVICE.It is absolutely LEGAL!!!!!!!!!!!!!!!1Now mail them to those address:#1 .....#2 .......#3 ........#4 ......#5 .......#6.......SECOND:Cancel the address #1 from the list, shift the other five up and insert your at the bottom.You are entering this chain of MONEYNow change what you may on this message and send it to the over 50.000!!!!! newsgroup all over the net.THAT'S ALLYou will receive average 15$ for each time someone else would send your address

• #6 15$ #5 225$ #4 3.375$ #3 50.625$ #2 759.375$ #1 11.390.625$ ____________________ TOTAL 12.204.240$ INCREDIBLE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!TRY IT, if it does'nt work so well you will take for sure a coffe for free. This message is arround the world if you don't take this train someone will and he will earn your MONEY.

CHAIN LETTERS

• The recruiter sends letters(or e-mails) to people with a list of names on it, including his at the top.

• He instructs you to send money to people whose names are on the list, then add your name to the list.

• May be accompanied by inspiring stories, superstitions, etc.

CHAIN LETTERS

• Are also very popular in e-mail form

• Here’s a couple more gems from my personal collection.

DISCUSSION QUESTIONS

• Have you ever been scammed?• What can you do to protect yourself

from these types of scams?• What makes people become victims?

– GREED?

– IGNORANCE?

– WISHFUL THINKING?

DISCUSSION QUESTIONS

• Risk and Reward are _______________ related.

• Why does knowing this help us out when it comes to scams?

COMMON SCAMS from FBI.GOV

Common Fraud Scams• Telemarketing Fraud• Nigerian Letter or “419” Fraud• Identity Theft• Advance Fee Schemes• Health Care Fraud/Health Insurance

Fraud• Redemption/Strawman/Bond Fraud

Investment-Related Scams• Letter of Credit Fraud• Prime Bank Note Fraud• Ponzi Schemes• Pyramid Schemes

Internet Scams• Internet Auction Fraud• Non-Delivery of Merchandise• Credit Card Fraud• Investment Fraud• Business Fraud• Nigerian Letter or "419" Fraud

Fraud Target: Senior Citizens• Health Care Fraud/Health Insurance

Fraud• Counterfeit Prescription Drugs• Funeral and Cemetery Fraud• Fraudulent "Anti-Aging" Products• Telemarketing Fraud• Internet Fraud• Investment Schemes• Reverse Mortgage Scams

BE CAREFUL OUT THERE!

• http://www.fbi.gov/scams-safety/fraud/internet_fraud/internet_fraud