The Myths Behind “Get Rich Quick” Investments

Doug Brown – Director Investigation & Enforcement

Jan Banasiak - Senior Investigator

MYTHS ABOUT THE SCAM ARTIST

•Looks and acts like a con man

•someone not involved in community

•stranger, someone from out of town

•always trying to sell me something

MYTHS ABOUT INVESTMENT SCAMS

•Always lose your money

•no one gets hurt

•only happens to dumb people

•starts and ends quickly

•can’t happen to me

Themes Used to Gain Your Trust

•Anti-Government

•anti-tax

•anti-banks

•exclusive offer

•investment only available to the rich

•limited time to participate

•complicated sounding investment

AVENUES FOR SCAM ARTISTS

•Internet

•Telephone

•Mail

•Small group meetings

PRIME BANK INSTRUMENT SCAM

•“What the government, doesn’t want you to know.”

•“Over 100% return on your money - with no risk.”

•“We’ll take the money offshore.”

•Some investors do make money - for a while.

•Triwest Investment Club

Tri-West players to face fraud chargesTri-West players to face fraud chargesAlyn Richard Waage, a former Edmonton resident and alleged mastermind of a $60-million (U.S.) Internet investment scam, will appear in a California court Tuesday to face charges of fraud and money laundering, U.S. authorities said yesterday.His scheduled court appearance comes after a Federal grand jury in Sacramento decided there was enough evidence to proceed with the case against Mr. Waage and his alleged accomplice, James Michael Webb of Mountain View, Calif.Together, they are charged with 24 counts of fraud and money laundering in connection with the Tri-West Investment Club, which is reputed to be one of the largest Internet investment fraud cases in U.S. history.If convicted, they face fines of over $120-million, prison terms of five to more than 20 years and the forfeiture of millions of dollars worth of real estate in Costa Rica and Mexico.U.S. authorities say they would also have to forfeit a yacht, a helicopter, over a dozen cars, and millions of dollars in bank accounts in Latvia, Mexico and Costa Rica.Mr. Waage is considered a flight risk and is being held in a Sacramento jail, said Patty Pontello of the U.S. Attorney's office, Eastern District of California.The indictment comes after U.S. authorities spent 17 months trying to get Mr. Waage and Mr. Webb extradited from Costa Rica.According to Canadian and U.S. securities regulators, the Tri-West group operated from 1999 until mid-2001 and allegedly netted more than $60-million from 15,000 investors worldwide.

It is alleged to have attracted investors by offering guaranteed, no-risk returns of as much as 120 per cent a year through trading in so-called "prime bank" notes, which regulators say do not exist.Mr. Waage and associates allegedly used investor funds to make dividend payments to some investors and to buy millions of dollars worth of property in Mexico and Costa Rica in what investigators called a "vast Ponzi scheme."In September, 2001, Mr. Waage and Mr. Webb, a U.S. citizen who allegedly designed the Tri-West Web site, were arrested in San Jose, Costa Rica, by authorities acting on U.S. warrants.The arrests capped a months-long effort in the United States and Costa Rica to investigate and detain Mr. Waage, who had been arrested in April, 2001, in Mexico after arriving in Guadalajara with an undeclared $4.5-million in cheques and money orders. At that time, he posted bail and moved to Costa Rica.Mr. Waage's son, Cary Waage, was arrested in December, 2001, on his way from Canada to Costa Rica. In April, the U.S. Department of Justice said Cary Waage pleaded guilty to one count of mail fraud and one count of conspiracy to commit money laundering.As part of a plea agreement, Cary Waage agreed to co-operate with authorities and to forfeit millions of dollars connected to Tri-West.

By Peter Kennedy, VancouverGlobe and Mail, Jan. 4/03

RRSP SCAM

Money locked into an RRSP or retirement account is sheltered from tax until the money is removed.

Unlock retirement money to either:

• receive a loan

• receive a portion as cash

RRSP SCAM

Loan 70%payments

shares

Cash

Letter

YourAccount$10,000

Cash

Company “A”

$7,0

00

direction

Cash

Trust Company

Loan Company

RESULTS OF RRSP SCAM•Lose your retirement savings

•left with worthless shares

•loan payments

•possible tax penalties

INTERNET SCAMS

The perfect medium for criminals

• Your own web site - a license to steal

• Do you know who you are dealing with?

• There is one born every minute (OSC web site)

The Pump and Dump

OTHER TYPES OF INVESTMENT SCAMS

•Affinity Scams

•Pyramid Schemes

•PONZI Schemes

•Nigerian Letter

•Viatical Settlements

SCAM EXAM

All of these scams have the same characteristics.

• Promise of high return• no risk• secrecy• guarantee• secret trading or confidentiality• non-disclosure, no paper trail• urgency• not clear how it works

HOW TO AVOID SCAMS•Check out the person offering the investment

•Demand information about the investment

•Get someone else’s perspective

•Don’t be rushed

•Use common sense

Unless you win the lottery, it’s a myth that you Unless you win the lottery, it’s a myth that you can “get rich quick”can “get rich quick”

CONTACT

The Manitoba Securities Commission

•945-2548

•1-800-655-5244

•www.msc.gov.mb.ca

The RCMP

•www.rcmp-grc.gc.ca/scams/scams.htm