By John Rotondi
It’s a question we should ask ourselves.
Not a week goes by without a putative financial scam, and its alleged perpetrator, being in the news. By the time they’re caught, the money — your money — may be gone.
On May 12t the Department of Justice arrested and charged Eddy Alexandre, a Long Island resident and founder of EminiFX, Inc., a supposed investment platform, with fraud.
He is accused of lying to hundreds of investors about how the $59 million he collected from them between September 2021 and May 2022 would be used and what returns they’d receive.
The authorities allege that most of the money wasn’t invested, and the portion that was sustained heavy losses. Some of the money was even used on lavish personal expenses, including a $155,000 BMW, according to the DOJ press release.
Be aware of one or more of these warning signs of investment fraud:
• Your money isn’t held with a well-known, reputable, and
independent custodian. You’ll want to know which custodian will protect your funds and deal directly with that institution when obtaining your account balance.
If you’re sending a wire transfer or writing a check to the individual that approached you about the investment, it’s possible you’ve seen the last of that money. According to the DOJ charges against him, Alexandre was the sole signatory on the bank account to which investors deposited their funds, allowing him to send some of those funds to his personal brokerage account.
• You’re promised high returns with little or no risk. Any seller
who promises high returns, yet says the investment is “guaranteed,” “a sure thing,” or “won’t lose money,” is lying. It’s a fundamental tenet of finance that the higher the return, the higher the risk.
If an “investment guru” tells you otherwise, then walk away. Currently, a relatively safe one-year US Treasury security yields about 2%. If someone is promising you more than one hundred times that, as Alexandre is alleged to have done, then it’s going to be an investment with a lot more risk if it’s a legitimate investment at all.
Alexandre promised his investors that he’d make them millionaires with guaranteed returns of 5% per week, according to the DOJ.
• The returns from your investment appear overly consistent. Be
skeptical of an investment that generates steady positive returns, regardless of market conditions.
According to the DOJ, Alexandre falsely represented to investors that their account balances would increase each week within a consistent range, between 5% and 9.99%.
• The seller isn’t licensed to sell securities or commodities. Many
investment schemes involve individuals or firms that are not licensed. Before investing, check out the seller using these free search tools: https://www.investor.gov (for securities brokers or investment advisors) and https://www.nfa.futures.org/basicnet/ (for commodities brokers). Neither EminiFX nor Alexandre were registered, according to the DOJ complaint.
• The investment is esoteric, and/or comprises the latest fad. Today,
that might mean cryptocurrencies (digital money), such as bitcoin. It could also involve common financial instruments, such as bonds, certificates of deposit, and real estate. Alexandre claimed he used a “Robo-Advisor Assisted account” to conduct trading in cryptocurrencies and foreign currencies, referring to the underlying technology as his “trade secret,” according to the DOJ. If you don’t understand it, don’t invest.
• The seller is resistant to your requests for your money back. The
scammer may encourage you to “reinvest” any purported income. They know that the lower any redemptions, the longer the scheme will last.
In the Alexandre case, it appears that certain investors were able to withdraw funds, although the DOJ observed that it looked like it came from other investors, not investment gains.
• You found out about the investment through a community
organization or religious group. Investment fraudsters like to operate in trusting environments, so religious venues work particularly well for their nefarious purposes. A recommendation from a friend, or fellow congregant, is not due diligence.
It’s unknown if there was any particular affiliation among the investors that Alexandre solicited. However, it’s alleged that, like a pyramid scheme, he used at least some investors to sell the investment to others, perhaps attempting to create a connection among them.
• You trust the seller. Humans crave friendship and being social.
Sometimes, to one’s detriment, the con artist fills that need. It’s important to get yourself past the discomfort of asking tough questions. Any reputable seller will answer the questions you have so you can make an informed decision.
Alexandre organized an event at his office, calling it a “tremendous success” as it “put to rest many of the questions” that investors had about whether the EminiFX website address and office location were fake, according to the DOJ. A website and office aren’t enough to make an investment legitimate.
• There is undue pressure for you to invest “now.” The scammer
doesn’t want you to take too long to think about it. Time, however, is your friend. Take your time to investigate the seller and the investment before making any decision. And if you’ve already forked over money?
It’s never too late to conduct due diligence. If you suspect you’ve been swindled, report it. Contact the Securities and Exchange Commission at 1-800-SEC-0330 or online at www.sec.gov/complaint/select.shtml.
If you don’t report it, perhaps because you’re too embarrassed, and would rather chalk it up to experience, the fraudster just cheated you again.
John Rotondi, a resident of Port Washington, is the author of “Stand Up to Elder Financial Abu$e” (2017).
