Spotting a Con Artist

November 24, 2013

Con artists, short for confidence artists, are unscrupulous individuals who persuade people to believe in them and then convince those people to give them money for a "sure thing" investment. Most successful con artists look like regular business people and are usually smooth, well spoken and charming.

Con artists often work out of offices located at impressive-sounding addresses. However, upon closer inspection, most of these offices contain little more than telephones. Sometimes, the "office" address is simply a post office box.

Con artists choose their victims carefully, often buying lists of names and then approaching people on those lists. They encourage their unsuspecting targets to invest immediately in get rich quick schemes. They do not supply the victims with much information, or much time to investigate the claims being made.

Two common types of investment fraud are:

  1. Ponzi Scams 
    Ponzi promoters usually entice people to invest in financial products such as stocks and bonds or art work, and promise huge, short term payments on the investments. However, they have no business operations to support these purchases. They often pay interest to a few initial investors to attract others, but most investors will lose their money. These promoters usually rely on word of mouth to line up new investors.
  2. Pyramid Schemes
    These schemes usually include illegal multi-level sales operations sometimes, appearing to involve selling or distributing products or services. However, recruiting others is more important than selling the product. Pyramid promoters usually persuade people to buy distributorships for goods or services and tell them that they can earn large profits by recruiting other people to buy distributorships. Each new level of recruits pays money. This money then flows to people who are higher in the pyramid. These schemes eventually collapse when no new recruits are found. Most investors lose their money in pyramid schemes. Additionally, and most importantly, these activities are in direct contravention of the Competitions Act, which is legislated and enforced by Industry Canada, and therefore are illegal.

Common types of phony investment vehicles include: diamonds, sapphires, gold coins, and other precious gems and metals as well as gold and silver mines, oil wells, oil and gas lotteries, agriculture, livestock, and art work.

Watch for warning signs such as unsolicited phone calls, especially those that include any or all of the following characteristics: fantastic claims, compromising offers, guilt-selling, ground floor deals, verbal information only (no written follow up), new inventions, now-or-never opportunities, or lack of time to investigate the offer.

If you think you have been taken, report the matter quickly, to your local police department or RCMP detachment. Con artists count on the chance that you will delay reporting scams. Your prompt complaint may keep others from being defrauded.

For more information on this and other investment scams contact: