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The Legitimate Business Of Scamming In Real Estate Investments
If you have reached adulthood without ever been scammed in some way, you are an exception instead of the norm. It would be a record so clean that any presidential candidate would envy. Well, what if you found out one day that your legitimate investments are not paying out as it had promised? And there is no way for you to exit at all, let alone exit at a loss.
Scenarios like these are getting more and more common in the world of investments. When real estate promoters without a proper company try to sell us a 100% yearly return, we label it a scam. But when promoters come all the way from Germany try to sell us investment opportunities under the disguise of a corporate arm that is unheard of, we call it a golden opportunity. And for a disturbingly huge number of people, they fall for these baits while thinking about the amount of money they will be swimming in because of the good fortune of chancing upon such a deal.
My attention is not about those phone calls or letters that hit our email inboxes and mobile phones everyday. Those are the ones that would convince their victims to send money to a bank account or via Western Union. They then disappear without a trace. Victims of these scams have it easy. The confusion, followed by agony and shame is over and done with pretty quickly. They can then move on with their lives.
It is the people who have tied themselves up with shady investments thinking they are legit that gets dragged through the mud of emotional roller-coaster. And I totally agree that it is more painful compared to a straight-out scams due to the presence of false hope.
Imagine one day being informed of an upcoming windfall. Then followed by 3 months of silence. Good news comes up again, followed by another 6 months of silence. The only thing that is going on in the investment is the work involved in blasting out news releases to stakeholders talking about what is going to happen. But nothing ever happens.
And all these while the key promoters of the investment is constantly seeking new investment funds citing the need to hire expertise and conduct research. The expertise and research is of course conducted by them. Meaning all the funds that are being pumped into these investments are used to retain the highly-paid employees, themselves. The industry for start up, growth companies, and real estate investments are the biggest players of such operations.
They get millions in funding and spend at least half that money to pay their own salaries. They then hit that fancy financial term called a second trench, and a third trench, and so on. And seek more money again to fill their own pockets with money.
In many cases, having the business go live and enter the real market to generate revenue will actually negatively affect the income of the promoters running it. So the business never gets out of that research and development phase. Constantly flying around the globe in first class to meet more sugar daddies for more money to pay themselves.
Investors will almost never see their money back. They just hold onto the faith, or false hope, that things will turn for the better. You can’t actually report it to the commercial police as investment success is nothing that can be guaranteed. Bingo. You cannot cash out your investment as there is no open market to buy your shares or assets. You can’t vote against the CEO as he is most likely the largest shareholder. And you can’t force builders to complete the construction of a vacation resort you have invested in because they need money to continue building. You are pretty much trapped in a vacuum with no place to go.
Does this strike a chord with you? Because if this sounds freakishly familiar to you, it’s time to admit it. You have been scammed by a LEGITIMATE scam artist. Legitimate because they are legally allowed to scam everyone that stands in their path. They have the law to protect them and they exploit it to the fullest extent. The worst part is that there is nothing you can do about it. They have gone about their deception according to the law. There is proper legal documents on what they do, staff that are properly employed, and even real engineers working on projects. The only noticeable missing item is that investors are not being paid. And because you cannot expect certainty when investing, you are pretty much screwed.
When we live and operate in a developed nation, we often fall victim to thinking that the law will protect us from commercial crooks and criminals. But don’t forget that in places where law is commercially enforced, very smart people can get away with anything as long as they follow the rules. The sub-prime mortgage crisis is one prime example. And then we have these smaller players who try to scam us with legitimate investment opportunities.
If you are still unable to grasp how they work, think of it this way. You have an idea for investing in property development. You manage to convince $10 million worth of investment funds into your idea. You then pay yourself $1 million per year as the Chief Executive Officer to operate the business while spending $1 million per year on builders. After 5 years, you run out of money and the project is incomplete and need more funds to continue.
You start all over again in fundraising. All the while the project is legitimately being developed while the only person getting legally rich is you. You can rinse and repeat this till retirement and never deliver anything. No one will be able to drag you into court as you have done nothing wrong. The biggest shareholders of the operation (you) approved it after all. In fact, if you actually finish the project and commence a revenue-driven business, you could start bleeding cash flow. It would actually be more financially savvy not to complete the project.
As disturbing as these scenarios sound, they are actually quite real. Honest, hardworking people are being suckered into these collective schemes everyday. And there is nothing that can protect them from such frauds except to educate themselves before getting involved. The more advanced con-artist can even give back a good return to earn more trust. Then ask for more investment funds based on that trust.
To protect yourself from such shams, the prerogative is to
1) Trust your gut. If you don’t feel comfortable about it, walk away.
2) Aren’t there alternative safer investments that promise a comparable return?
3) Talk to your mother. Sometimes, old-fashioned advice is the best around.
4) If you are not clear on how the investment works, you are free to walk away.
5) Don’t be a victim of aggressive sales pitches and peer pressure.