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Financial Fraud in America

Investment and financial fraud is a $50 billion a year crime – and one that can happen to the young, old, sophisticated investors and novices alike. A recent report from the FINRA Investor Education Foundation found that more than 8 in 10 respondents were solicited to participate in potentially fraudulent financial offers, with 11% of all respondents losing a significant amount of money after engaging in such deals.

Even though financial fraud and investment schemes are commonplace, many Americans don’t know the red flags of financial scams because they lack an understanding about the fundamentals of investing, such as realistic rates of return on their money. Older Americans are particularly vulnerable to financial fraud. According to the FINRA Foundation report, Americans age 65 and older are more likely to be targeted by fraudsters and more likely to lose money once targeted. Upon being solicited for fraud, older respondents were 34% more likely to lose money than respondents in their forties.

Additional highlights of the FINRA Foundation study include the following:

– Many Americans are vulnerable to fraudulent investment pitches promising unrealistic returns because they fail to realize what a reasonable return on an investment should be. For example, nearly half of respondents found a daily rate of return of more than 2% appealing. Claims of achieving “typical” returns of 110% per year were found attractive by 42% of respondents.

– 84% of respondents reported being solicited with at least one of the 11 types of potentially fraudulent offers.

– 67% said they had received an email from another country offering a large amount of money in exchange for an initial deposit or fee.

– 64% had been invited to an “educational” investment meeting that turned out to be a sales pitch.

– 18% had been asked to participate in an investment that offered a commission for referring other investors.

You can read FINRA’s entire report here.

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