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  1. #1
    Join Date
    Oct 2006

    Scams, Gambling & Investments

    Scams, Gambling & Investments:
    And How to Spot the Difference

    The internet is a wonderful source of information - both good
    and bad. It's also a playground of profitable possibilities for
    would-be and seasoned shysters and scam artists.

    Apart from pornography, one of the most prevalent types of
    content one can find on the web is in the moneymaking category.
    And I guess, like sex, money has universal appeal!

    Now, this leads to all sorts of potential problems, especially
    when easy money is promised.

    To learn how to spot the difference between a legitimate moneymaking proposition
    and a scam is not automatically easy.

    At least it's not easy if you allow yourself to be mesmerized
    by the promise of something for almost nothing.

    The starting point in getting to grips with this conundrum is
    to realize that greed plays a big part in human nature. Sorry
    to be so blunt, but it seems we're wired for it.

    You see this played out over and over - whether it's women
    battling each other to grab the best garments in a crazy sale,
    or crazy people queuing up to get financially fleeced in some
    hair-brained pyramid money game.

    The motivation is the same. Something for nothing - or almost
    nothing. And that desire is fuelled by greed.

    If you can accept that you may have a built-in propensity to
    seek the easy route, to get your hands on easy money - and
    factor that into your decision making - then you will be in a
    much better position to more rationally appraise various
    moneymaking opportunities.

    There are two main generic scams continually circulating on
    the internet. One is the "advance fee" scheme, and the other
    is the "Ponzi" or pyramid scheme.

    The first is epitomized by the "Nigerian Letter" fraud - which
    is essentially a promise of big bucks in exchange for some
    "help" to retrieve the money. The strategy is to suck you into
    the scenario to such an extent that you become emotionally
    wedded to it. Then, when you are asked to put up a fee to make
    things happen, you are already hooked and part with your cash
    without a whimper. Never to be seen again.

    The ponzi scam is named after Charles Ponzi who came up with
    the novel idea of enticing investors with the promise of very
    large returns - and paid them out of new investors' money. In
    the end, of course, the last investors lost their money, and
    the whole thing was exposed as a complete fraud.

    Some ponzi schemes are very crude - like the original chain
    letter. You'd think we would have risen above that one - but
    it keeps on resurfacing. However, most are now more
    sophisticated, often disguising themselves as an
    "investment" with unusually high returns.

    Over the last few years such ponzis have sharpened their act,
    and now present themselves with smart, professional looking
    websites - plausible wording and an enticing sales pitch. The
    primary hook, apart from the promised returns, is the referral
    fee - if you recommend others. In this way, the modern ponzi
    can harness the viral marketing power of the internet in ways
    impossible in the snail mail age.

    But you have to take responsibility for your own decisions, and realize what
    you are getting into.

    If you know the risks, then it becomes like gambling - where
    it is clearly understood that there are winners and losers.
    And I certainly don't advocate that the state should
    criminalize gambling.

    However, it does appear that some people can't tell the
    difference between gambling (in all its forms), a ponzi,
    and an investment. And this fact is often used by the
    authorities as an excuse to enact laws to protect people
    from themselves.

    For example, it's imperative to distinguish between ponzi
    schemes and gambling. And it shouldn't be hard.

    Gambling involves taking a stake in a money game where there
    are clear rules and directives as to who becomes the winner.
    Luck is the usual arbiter in gambling - and this is managed
    in various ways. It could be lotto, where numbers are drawn
    from a barrel; it could be a lottery where one person has the
    lucky ticket number; or it could be horse racing or sports,
    where you place a bet on the outcome of the race (where "form"
    and luck both play a part).

    The point is that in gambling, you know there will be winners
    and losers, and you know the means by which this will be
    determined. You have full disclosure

    Not so with a pyramid or ponzi.

    If a ponzi is disguised as an investment, then it is likely
    to offer high returns (to appeal to greed), and use referral
    fees to get people to spread the word.

    Now, the explicit message is that everyone who joins up will
    make say 10%, 20% or even 100% per month on their money.
    However, the truth is that only the early birds will catch
    the worm and walk away with the loot. Why? Because the funds
    to pay out the promised returns come from the new players.

    So, the pertinent question is, do these new players fully
    understand they are funding earlier "investors", and so
    they realize they could lose their shirt? Probably not.

    If a moneymaking scheme states that it is a "game", makes
    no guarantees, and openly declares that your money is paying
    those before you, then you know the rules before entering -
    and cannot cry over spilt milk if you lose your money.

    On the other hand, if money is taken using terminology that
    indicates a legitimate investment is being offered - which
    later turns out to be a ponzi scam - then clearly the
    participants have been defrauded, because they were not
    told the true facts.

    In a situation like this, one should be able to pursue
    legal action to reclaim the lost funds - because such money
    was taken under false pretences.

    However, such a retroactive course of action does not mean
    one shouldn't exercise rational judgment before entering
    into any form of investment - even more so, if exceptional
    returns and referral bonuses are being paid!

    This brings up another dilemma. You've all heard the old
    maxim: "If it sounds too good to be true, then it probably
    is". It's one of those well-worn slogans that is sometimes
    more confusing than helpful.

    So you have gambling, which clearly discloses the risks
    inherent in participating; ponzi/money games, which usually
    don't, and are essentially fraudulent offers; and finally
    you have real investments.

    Of course, putting your money into legitimate investments
    does not eliminate the risk of losing your money - it's just
    that such a structure is not set up with the purpose of
    defrauding you! When you invest your money you should demand
    full disclosure as to the inherent risks of the proposition.

    However, no investment is 100% safe. Even government bonds
    depend finally on the state's ability to forever tax its
    citizens - something I personally wouldn't want to bet on!

    And this is where we come across yet another old maxim -
    "the higher the potential return - the higher the risk".
    Once again, this is a useful indicator - but not infallible,
    as there are obvious exceptions.

    So, to recap: the essential difference between a scam,
    gambling and an investment - is that the "rules of the game"
    are known in advance, and you participate in the full
    knowledge of the risk you are taking.

    A ponzi scam deliberately misleads, whereas gambling and
    investing offer disclosure as to the risks.

    You cannot avoid risk - it is part of life. You will never
    find a truly risk-free investment. Even money in the bank,
    in most countries, is deemed "unsecured" - and therefore
    at risk, should the bank fall over.

    So accept risk as part of life, and concentrate on weighing
    up the risk - according to your own requirements and your
    psychological response to such risks - against the perceived
    benefits you may receive.

    Some people literally can't sleep at night if they feel
    financially exposed. While others are like adventurers,
    wading through shark-infested waters, with their eye on
    the end prize.

    There's no doubt some people get lucky and make money from
    gambling, or get in early and make money from ponzis. But
    there's no doubt that most people lose money from such

    The challenge for you, is to keep your head on, stay calm,
    don't be driven just by the promise of a quick buck, but to
    assess the offer in the light of your financial position
    (whether you can afford to take a risk or not), and make
    a reasoned decision.

    Don't be panicked into action - panic is never a good
    emotion. The best advice, if being rushed by someone, is
    to withdraw and give yourself time to evaluate something
    with a cooler head.

    Something else will always come along, so don't be fooled
    by someone claiming that you will lose out if you don't
    say "yes" now!

    The world (and the internet in particular) is bursting
    with opportunities - and once you have a clear idea of
    what you are comfortable with, you will have plenty of
    time to participate and profit.

    And remember, you alone are responsible for the decisions
    you make. Caveat Emptor! "Let the buyer beware".

  2. #2
    Join Date
    Dec 2006

    Re: Scams, Gambling & Investments

    why is this in the Mortgage part of the forum?
    "If you always do what you've always done, you'll always get what you always got"

    National Taxes, National Borders!!


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