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Common sense should prevail in get-rich-quick schemes

Investors should perform their due diligence before making a financial commitment, because a company's claims that sound too good to be true, usually are, Toronto forensic accountant and investigator Dave Oswald tells AdvocateDaily.com.

It’s a cliché people keep falling for: sales pitches that offer outstanding returns, and victims who are looking to cash in, says Oswald, founder and owner of the white-collar crime investigation boutique Forensic Restitution.

Global News recently reported on a mortgage firm facing two lawsuits after Peel Regional Police launched a criminal investigation. One investor told the news agency that he was allegedly promised a 20 per cent return through mentoring and real estate investing.

The Financial Services Commission of Ontario (FSCO) — which operates a search engine so people can check a mortgage company's licences — also issued a warning that the firm and six people associated with it were allegedly not licensed to conduct mortgage business in the province.

Oswald says people were allegedly duped into believing they would receive a “superb rate of return” by investing in the mortgage firm.

However, the allegations have not been proven in court.

“The last time I checked, mortgage rates aren’t that high in Canada, so how on earth could they produce these hugely inflated returns if they were just giving out mortgages?” he says.

“We all want to get rich quick. We tend to think we’re smarter than the next person and we are greedy. That’s our weakness — we want it all now,” Oswald says.

While he has no direct knowledge about this matter, Oswald says victims get hooked into a scam because of the promise of huge returns. He says in many cases, there’s a dividend paid out from a small investment, but that’s a technique to lure the investor into making a large deposit into the scheme.

Potential investors should conduct due diligence into any investment by checking if that person or business is licensed by its overseeing body and if any complaints or lawsuits have been filed against it, Oswald says.

“This is always a prudent course of action — whether it’s a share broker, a mortgage firm, or a new bank,” he says. “It’s important to understand what you are getting into.”

Many investors are vulnerable because they don’t understand the machinations of the market, and they believe the people they’re dealing with are professionals who would not lie to them, Oswald says.

An investor’s due diligence should include assessing their personal liquid financial situation to determine whether they could cover expenses if the investment fails, understand the workings of the business they're investing in and review the management team, he says.

People should also search for customer reviews to determine how satisfied they are, and ask the company for at least for 10 references who can be called randomly, Oswald says.

“That makes it harder for them to hide any complaints that have been filed against the firm,” he says. “Complaints would be a big red flag."

Oswald says if the returns appear to be too high for the market, ask the firm for an explanation.

“Don’t just accept those high returns as truthful,” he says.

People trying to sell fraudulent schemes are often charismatic and willing to invest a significant amount of time into grooming an investor, Oswald says, adding he knows of cases where con artists spent up to six months wooing a potential victim before even asking for money.

“They’re really nice people who go out of their way to help you,” he warns. “If they get $25,000 out of somebody, that’s easy money for them but a huge loss for the investor."

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