Dinars for Dupes
A friend of mine, a woman with some good sense, told me about a couple who had been persuaded to buy dinars, the Iraqi currency, as a great investment.
I thought she was joking and started laughing. But she was serious.
Investing in foreign currency can be a legitimate way to make money. But it's not for the average investor, and certainly not appropriate for unsophisticated investors.
Yet schemes like this will snare a lot of people looking for a winner in weak market conditions in the United States and abroad. Unsuitable investment pitches and straight-out cons will increase in the weeks to come as stock markets continue to wobble.
It is high season for opportunistic scams and con artists who use news headlines to deceive their victims.
"There is one thing that investors can always count on," said Karen Tyler, North Dakota securities commissioner and president of the North American Securities Administrators Association. "Financial predators and ethically challenged salespeople will exploit the headlines and use investor fear to make the next sale or execute a fraud."
Crooks wait for periods like this when investors panic. Panicky people are easy pickings for schemes that appear to be safe alternatives to investing in a declining market for equities.
"We have weakening economic conditions and Wall Street's collective miscalculation of risk driving stock market volatility, so it's understandable that investors may begin to second-guess their investment decisions," Tyler said.
But don't let your desperation for better returns cause you to fall for a fraud, warns NASAA, whose membership consists of state securities administrators.
Tyler said the pitches will come from two types of predators: typical fraudsters, and unscrupulous registered and licensed financial professionals trying to boost their commissions or fees.
Take, for example, the Iraqi dinar scam. In this con, promoters promise double-digit returns to investors. The promoters tell people that democracy in Iraq and the ensuing peace will stimulate the economy and drive up the value of the post-Saddam Hussein dinar. The Better Business Bureau has seen a substantial increase in complaints from around the world about the dinar scam, with many of them coming from military personnel and civilian contractors. The BBB said people complained that they paid for the currency but never received the money.
The Idaho Department of Finance, which shut down one promoter selling dinars, warns that investments in foreign currencies -- particularly when they involve unstable countries -- are highly risky. How risky? Oh let's see: