Berlin based Dr. Schulte and Partner Rechtsanwälte concentrate on assisting our clients preventing internet scams. The ever-growing online community embraces possibilities – and forgets to take care Finding the correct way is vital to successfully pursuing Claims.
The Federal Bureau of Investigation (FBI) put out an interesting collection of Tips regarding fraud Prävention. For potential clients it might be helpful to examine if one or more cautionary advices were not heeded:
Tips for Avoiding Investment Fraud:
• Don’t judge a person or company by their website. Flashy websites can be set up quickly.
• Don’t invest in anything you are not absolutely sure about. Do your homework on the investment and the company to ensure that they are legitimate.
• Check out other websites regarding this person/company.
• Be cautious when responding to special investment offers, especially through unsolicited e-mail.
• Be cautious when dealing with individuals/companies from outside your own country.
• Inquire about all the terms and conditions.
Tips for Avoiding Business Fraud:
• Purchase merchandise from reputable dealers or establishments.
• Obtain a physical address rather than simply a post office box and a telephone number, and call the seller to see if the telephone number is correct and working.
• Send an e-mail to the seller to make sure the e-mail address is active, and be wary of those that utilize free e-mail services where a credit card wasn’t required to open the account.
• Consider not purchasing from sellers who won’t provide you with this type of information.
• Purchase merchandise directly from the individual/company that holds the trademark, copyright, or patent.
Tips for Avoiding the Nigerian Letter or “419” Fraud:
• Be skeptical of individuals representing themselves as Nigerian or foreign government officials asking for your help in placing large sums of money in overseas bank accounts.
• Do not believe the promise of large sums of money for your cooperation.
• Guard your account information carefully.
Reality and actuality – the reality of investment income
Fraudsters shout: ‘Give me your money and you’ll be rich.’ Fraudsters predict substantial investment income if you wait. This appeals to victims (humans tend to devour the flesh of other Neanderthals without first exposing themselves to the efforts of an extended and dangerous hunt).
What is capital income?
The encyclopaedia says: ‘Capital income is the income minus expenses that the owner of an asset or unproduced tangible property (land) receives during the income period in return for providing another institutional unit with financial resources or unproduced tangible property.’ In other words, someone gives money and receives a return or interest.
Income from assets is minimal
According to available data, income from assets currently falls in Europe Source: Federal Statistical Office
It states:
‘Calculated at current prices, gross domestic product and gross national income in the first quarter of 2019 were…while compensation of employees was 4.7% higher than in the first quarter of 2018, corporate and property income fell by 2.6% according to initial preliminary calculations.’
Interest rates are currently low.
Why are fraudsters promising high profits?
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It is well known that no one can beat the market in the long run. Despite the statistical improbability, fraudsters strike an optimistic note. The fact is that science has reigned supreme since the end of the Middle Ages 500 years ago. This means that high profits must be proven. People shy away from the risk of losing money and prefer to keep it for themselves. Fraudsters claim high profits with little risk.
High profits, no risk? It doesn’t exist!
Prime bank fraud (PBB) involving standby letters of credit (SLC), prime bank guarantees (PBG), prime bank (promissory) notes (PBN), (prime) bank debentures, mid-term notes (MTN) and similar instruments regularly display the same characteristics of fraud:
The extremely high returns promised by bank fraudsters, ranging from 20 to 200%, with no risk or low risk, have nothing to do with reality. It is well known that returns and risk are closely linked in investments: higher risk brings greater opportunities for good returns and a greater risk of losing money. Conversely, lower risk means lower returns. Exorbitant returns with little or no risk do not exist in the real financial market.
Realistic returns are in line with the market
In order to obtain a point of reference/benchmark (overview) of the returns that were or are achievable on the capital market over time with low risk, the Deutsche Bundesbank, for example, provides an explanation using the current yield. The current yield of the Deutsche Bundesbank refers to bonds issued in Germany with an original maturity of more than four years and a remaining maturity of more than three years. Current yields are highly regarded indicators of interest rate trends and are used as reference values in case law and by the banking industry.
The current yield fluctuates between 0 and 4.5% per annum. This makes it clear that promised returns with little or no risk were and are unrealistic. This is true against the backdrop of returns on speculative investments such as hedge funds, which specifically use derivatives and other leveraged products. Average returns are between 5 and 10% per annum, and in good years up to 15% per annum.
Belief in phantom markets inspires people
In order to make the risk-free, exorbitant returns credible to investors, fraudsters claim that there is a secret or exclusive market. This is summarised under the term ‘phantom market’. This claim serves as justification for the fact that only a privileged few know about this market and benefit from the sensational returns. On the other hand, fraudsters use this claim as a preventive measure to protect themselves against any attempts by potential victims to verify their statements about the alleged transactions. For example, they argue that most bank employees would not know anything about these transactions if asked, or would deny their existence because the bank (secretly) profits from the highly profitable investments. The bank’s customer advisors are under sales pressure and would prefer to sell the bank’s own unattractive investment products?
The allegedly essential secrecy surrounding these lucrative investment opportunities makes it possible to fob off potential investors who want specific details about the investment with some general information. This alleged confidentiality exempts the perpetrators from, for example, giving the victims specific – and therefore verifiable – names of any business partners or accomplices abroad or providing them with any bank or other original documents relating to the alleged transactions.
3. Security
Fraudsters lead their victims to believe that the capital invested will generate high returns, while at the same time claiming that the investment capital is 100% secure.
4. Contract structures
Mandate and trust agreements
In order to make the fictitious trading transactions appear real, written mandate or trust agreements are concluded with the investors. The trust agreements enable investors to participate in the supposedly highly profitable transactions. The typical defence strategy of the providers or other persons involved in the fraud regularly includes the following claims:
- The existence of the programmes offered is believed.
- Even becoming a victim of fraudsters or dishonest business partners is a familiar feeling.
In some cases, criminals or their intermediaries set up additional shell companies, known as ‘front companies’, specifically for the purpose of concluding such contracts. The money collected is later transferred and laundered via these accounts. This is justified by alleged tax advantages. In reality, the aim is to conceal the criminal background of the transactions and protect those behind them from criminal and civil liability. The contract texts used for the contracts and agreements described above are copied by the masterminds behind criminal investment schemes involving banking instruments from ‘professional colleagues’, or documents proving the existence of the high-yield investments offered are copied and passed on to each other. It is not surprising that similar contracts and documents as well as the same pseudo-technical terms appear in various cases. Complex transaction structures are striking. A key feature of the fraud is the fact that the perpetrators deliberately complicate a simple purchase and sale transaction in an extensive set of contracts to such an extent that it is incomprehensible or even nonsensical.
Now the most important thing: little test lies to see if someone falls for it.
5. Pseudo-technical language
The vast majority of investors are completely unfamiliar with the investment products on offer. This is especially true when it comes to products with an international dimension. They have no understanding of how money and capital markets work. This lack of knowledge among most investors about the actual processes involved in certain banking transactions and the complex workings of the financial market is what fraudsters exploit. It is not surprising that fraudsters have developed their own pseudo-technical language in connection with banking instruments. They use these real banking terms in their communications with investors, combining them with invented expressions, reshaping them into new words or using them in irrelevant contexts. These pseudo-technical terms give potential victims the impression that they are dealing with real transactions. The fraudsters speculate that their victims will not be able to ask the right questions due to a lack of specialist knowledge and will be embarrassed to reveal their ignorance by asking unqualified questions. On the other hand, non-existent technical terms are a suitable means of keeping clever investors away from dubious offers. They claim to offer programmes or things that do not exist. A typical example is a name that gives hope.
Responsible for content:
Dr. Thomas Schulte
Lawyer
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Law firm Dr. Thomas Schulte
Malteserstraße 170
12277 Berlin
Phone: +49 30 221922020
Email: valentin.schulte@dr-schulte.de
The law firm Dr. Schulte Rechtsanwälte has been successfully practising civil law since 1995, specialising in the areas of Internet, reputation and competition law. It represents the interests of individual investors throughout Germany. Additional sender information with the location of the law firm can be found in the legal notice on the website www.dr-schulte.de.
Für unsere deutschsprachigen Leser hier eine kurze Zusammenfassung:
Der oben zitierte Text beschäftigt sich mit den Hintergründen und den Warnsignalen rund um den Komplex Anlagebetrug und Internet Kriminalität. Woran erkennt man unseriöse Angebote und welche Warnzeichen gibt es?
Dla naszych międzynarodowych klientów istotne informacje w języku polskim:
Cytowany powyżej tekst dotyczy opisu oraz przedstawienia znaków ostrzegawczych na temat oszustwa inwestycyjnego i cyberprzestępczości. Jak rozpoznać podejrzane oferty i na jakie znaki ostrzegawcze trzeba zwracać uwagę?
For many years, we have been successfully assisting clients in overcoming Schufa problems. Our expertise will help you restore your financial reputation. Please do not hesitate to contact us:
The law firm Dr. Thomas Schulte is a trusted lawyer of the ABOWI LAW network and a member of the ASSOCIATION OF EUROPEAN ATTORNEYS.
- Email: dr.schulte@dr-schulte.de
- Phone: +49 (0) 30 – 22 19 220 20
