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A blazing red flag

The word savvy is defined as being shrewd and knowledgeable; having common sense and good judgment. To be a savvy investor, one should not only have common sense and good judgment, but use them too. When the claim is made that an investment is crash proof and has no risk, your inner BS detector should be firing on all cylinders, sounding the alarm like the reactor is headed for imminent meltdown and waving a gigantic blazing red flag.

Recently, the Securities and Exchange Commission (SEC) charged the operators of a $1.2 billion Ponzi scheme. Robert H. Shapiro and the Woodbridge Group of Companies, based out of Boca Raton, Florida, were charged with defrauding more than 8,400 investors. The SEC stated that Woodbridge used a business model based on lies and aggressive tactics. The scheme, primarily targeting seniors in Florida, sold notes supposedly backed up by mortgages.

Should investors have read the signs?

The signs of potential fraud are common and they were evident here. Woodbridge and a network of external agents solicited the investments through television and radio, print advertising and cold-calling, social media and seminars. The invitations to the south Florida events promoted the investments at dinners featuring chicken alfredo, salmon and shrimp scampi. Phrases used included, "How to make your retirement savings crash proof," and "no market risk."

According to an investment fraud alert from the SEC, these are the red flags:

  • Promises of high returns with little or no risk: Every investment has some inherent risk.
  • Pressure to buy quickly: You need to have time to research the investment.
  • Free meals: There really isn't a free lunch.
  • Unregistered sellers: Most frauds are committed by people that are not registered.
  • Financial professional's questionable background: There may be reasons why they keep changing firms.

If you've been indicted for investment fraud, an experienced white collar crime attorney can work with you to pursue the best possible outcome in your case.

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