Did YOU Just Buy A Trading Scam Or Ponzi Scheme?

It’s Saturday Morning with talk radio shows in full force. Advertisers are bombarding listeners who are retail traders with promotions for stock trading programs, training and group trading schemes.

Most are very pricey. Many start at around $10,000 dollars, others start at $45,000 – 65,000 and a few are as high as $100,000 for a trading system offered with an expensive A-grade business suite.  

Some are still trying to sell the once popular red-light/green-light day trading from the 1990s era, but the new twist is day trading e-minis.

The Ponzi schemes are even worse. Traders invest in a system and must pay 10% if they want to leave the group. Or they are all trading as a group or pooling money to trade. OR they are using someone else’s money and taking a cut on any profits they might get lucky enough to make. 

There is a plethora of illegal offerings right now and it’s focused on the retail trader, especially the retail day trader. 

The SEC has rules and regulations. Someone can’t recommend a stock or tell traders to buy a specific stock unless they are licensed by the SEC to do so.

Educators should have either a CMT designation for the Series 86 license or a CFA designation.

How do you know if you are dealing with a legitimate company for trading platforms, trading systems, trading education or training, etc?

1. The company should be licensed in a state in the US. It should have a business license and a location address.
2. The individuals who own the company should have any SEC licenses that are applicable. Example: if someone offers to provide you with stocks to trade, they must have a series 87 broker license. 
3. If it is a program or trading system, how long has the system or program been in existence?  Who designed it and when was it designed? Red-light/green-light systems failed dismally and there were lawsuits against companies in the ‘90s.
4. Group trading or group trading on behalf of another individual requires SEC licensing. There are strict rules and regulations. More often than not, this is an illegal scam.
5. What is the Better Business Bureau rating for the company?
6. Has the owner or individual selling the system ever been under investigation, fined or penalized by the SEC? Has any individual in the company ever worked for a company or an individual or owner who was charged with illegal activity and fined or sent to prison?
7. How long has the company been in business selling what they are offering?
8. Many promotions promise or guarantee certain results. There is no way to guarantee anything in the stock market. Guarantees are a huge red flag.
9. High cost of the product or service. Scams and Ponzi schemes are typically VERY expensive. If they offer you a means of mortgaging your home to buy their program or service, then it is definitely a red flag.

Unfortunately, just like anything you may consider buying, there is always the element of illegal activity by some companies or individuals. The gimmicks often promote instant wealth or huge profits that are clearly impossible.

The sad reality is this: Most people who buy these schemes are the ones who can least afford to lose their hard earned money.  When someone is desperate or needs money, they often disregard common sense and obvious scam tactics.

So the less money you have, the more you are a target for these fraudulent programs and schemes.

The most important thing is to wait and not buy anything on impulse. Check the company for its legitimacy and make sure a company actually exists. Check its background.  

Be especially careful with AI as there can be many problems with AI. It is an exciting new technology, but it has yet to be regulated and monitored to ensure the safety of those who are going to use it. AI can and does invade privacy and may put individual identity at high risk.

The SEC states that the aggregated total in penalties and disgorgement ordered during fiscal year 2023 – $4.949 billion – was the second-highest amount in SEC history, after the record-setting financial remedies ordered in fiscal year 2022.

The SEC is watching for scams, con artists and Ponzi Schemes. Do not be a part of this illegal activity. Report any illegal activity to the SEC. 

Depending on your participation and involvement in a scam or illegal activity, you may have legal responsibility and could face the fines, penalties or imprisonment provided by the law.

Never buy something that you have any doubts about. Take a week to think it over. 

Let the sales pitch fade and check references that are legitimate to make sure that any statements are valid and can be backed with real traders' success with using that system or program.

Martha Stokes, CMT

https://www.technitrader.courses 

Image sourced from Shutterstock

This post was authored by an external contributor and does not represent Benzinga's opinions and has not been edited for content. This contains sponsored content and is for informational purposes only and not intended to be investing advice.