Articles Posted in Agape Ponzi Scheme

The North American Securities Administrators Association has issued its yearly list of the top investor threats. The list is compiled through a poll of its member state securities administrators. With the enactment of Jumpstart Our Business Startups Act, which takes away the advertising restrictions when it comes to soliciting securities and other investments, now more than ever investors should be cautious.

The List:
Private Offerings (especially fraudulent private placement offerings, also known as Reg D/Rule 506 offerings): These are limited investment offers that are very liquid, poorly regulated, and have very little transparency. They are risky and might not be suitable for individual investors. Now, with the JOBS Act, these private placement offerings can be promoted to the general public, which means ads for them may be placed on billboards, social media, and other platforms even though not everyone who sees them is qualified to invest.

REITs: Real estate investment scams may involve new development projects or buying, or beleaguered properties. Non-traded real estate investment trusts that are owned by banks or waiting for foreclosure or short-sale can be problematic for customers, as can investment funds purportedly tied to interest in real property that has no equity and is very leveraged.

Ponzi Scams and High-Yield Investments: High-yield typically translates to greater risk. This type of investment program and Ponzi scams promise great returns and low risk while justifying why the opportunity is so great. Financial fraudsters will typically tout bogus credentials or belong to a certain organization or group and early investors get a return as they market to new investors. Such financial scams eventually collapse.

Affinity Fraud: This type of financial fraud targets members of a particular organization or group. Often, the fraudster is trusted because of the shared affiliation (ie. age demographic, membership, alma mater, ethnicity, religion, etc.)

Self-Directed IRAs Used to Cover up Fraud: Self-directed individual retirement accounts, which are typically safe investments, can be used to conceal a financial scam. Fraudsters may claim that the custodian of an account has more obligations than actual to investors, causing the latter to wrongly believe that their investments are protected from loss and/or legitimate.

High Risk Oil and Gas Drilling Programs: Energy investments that for some investors are becoming a preference over traditional bonds, stock, and mutual funds. They are very risky and really only appropriate for investors that can take huge losses. Unfortunately, some promoters will hide these risks and pressure customers to invest.

Proxy Trading Accounts: This can involve allowing individuals who say that they are experienced traders to manage or set up a trading account for you. It is not recommended for investors to let unlicensed persons have access to your brokerage account information or set up an account for you. Anyone who manages such an account for an investor should be properly registered and have a clean record.

Digital Currency: Virtual money such as PP Coin, Bitcoin, and others. Such coinage isn’t backed by tangible assets, not subject to a lot of regulation, and not government issued. Digital currencies’ value can be very volatile.

NASAA’s Top Investor Threats, North American Securities Administrators Association
Securities and Exchange Commission

Financial Industry Regulatory Authority

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Last week, Agape World Inc and Agape Merchant Advance LLP owner and founder Nicholas Cosmo was arrested and charged with running a $370 million mail fraud scheme. According to US authorities, Cosmo ran his alleged Ponzi scam from October 2003 to December 2008, taking money from over 1,500 individual investors.

Cosmo reportedly told investors that he would place their funds into bridge loans for businesses at interests as high as 16%. Investors were reportedly promised returns of up to 80%.

While a few commercial loans were made, the interest rates were significantly lower than what was promised. Also, less than $10 million was actually loaned out. Over $100 million was placed in commodity futures trading accounts that incurred about $80 million in losses. According to US Postal Inspector Richard Cinnamo, Cosmo paid recruiters some $55 million find investors. Many of the recruiters have criminal records.

Cosmo also reportedly used over $212,000 in investor funds to pay a court-ordered restitution from an earlier conviction. He also spent over $100,000 in investor funds for personal expenses and invested $300,000 in the National Tournament Baseball. Cosmo is president of that league.

In September, investors began complaining that their payouts had been postponed. Private investigator Mike Kessler notified the FBI, the New York Attorney general, and the Suffolk County district attorney that there were problems brewing, but no action was taken until investors were no longer getting paid.

In 1997, Cosmo was accused of misappropriating funds while working as a stockbroker. He pleaded guilty to one federal charge, was ordered to pay restitution, and was sentenced to 21 months in prison.

Related Web Resources:
In Echoes Of Madoff, Ponzi Cases Proliferate, Wall Street Journal, January 28, 2009
Agape World Inc
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