Published: March 19, 2011

Small-business owners beware of fraudulent sellers


Lynn Edgington, founder of Eagle Research Associates Inc., in Mission Viejo, and is the author of “Robbing You With a Keyboard Instead of a Gun”. He and others in the company research internet investment scams and internet investment fraud and getting that information to law enforcement.

Most of us would like to believe that we would never fall for an investment fraud or Ponzi. We believe that we are educated enough to know better, and would never put our financial security at risk in an investment program that sounds too good to be true.

While we like to think and believe that is true, the reality is it just the opposite. The truth is that many highly educated people are falling victim to investment fraud and Ponzi schemes today. It makes no difference as to how much or how little education you have, today your odds of being a victim of investment fraud or a Ponzi are greater than ever before. Remember the victims of Bernie Madoff? These were astute businessmen, traders, CEO’s of nonprofit corporations and their board of directors who were victims.

The FBI director came within a few strokes of being a victim of a bank phishing e-mail.

Today there is an alarming new trend in investment fraud and Ponzis. We have professionals who are running these illegal investment programs. These are: attorneys, CPA’s, financial planners, stock brokers, hedge fund traders, real estate brokers, insurance agents, and even pastors and rabbis, all running illegal investment programs.

And if that is not shocking enough, many of them were senior citizens who were stealing from their senior citizen clients.

So how were these professionals able to steal so much money from their clients without their knowledge? One word…trust. We were taught to trust our financial advisors, our pastors, our rabbis, and professional people, and we would never dream they would steal from us. Well, that is until now.

Today you can “trust” no-one. You must verify, verify, verify but never trust. While this may sound harsh, this is your life’s savings we are talking about. If you think it can’t happen to you, think again. If you think it happens to people “out there,” but could never happen here in Orange County, think again.

Just in the last three years alone, over $1.8 billion dollars was stolen right here in Orange County from investment fraud, and $750 million dollars of that was stolen by just one person.
So how do you protect yourself? You perform due diligence. Due diligence is in part just using common sense. It also means that you check everything out, including the person offering you the investment before you invest.

To offer you a security, the person offering it must be a licensed broker. The agency that is charged with the registration of the broker is FINRA (Financial Industry Regulatory Agency).

The investment must be registered with the SEC (Securities and Exchange Commission). Years ago, all a broker needed to offer securities was a Series 7 license. Today there are many different security licenses for the various types of investments. Make sure the person offering you the investment is registered with FINRA and the investment is registered with the SEC.

If the investment being offered is a hedge fund, option, or futures trading, the broker must be registered with the NFA (National Futures Association), and the type of fund registered with the CFTC (Commodities Futures Trading Commission).

Whether it is your attorney, pastor, rabbi, financial planner, investment advisor, stock broker, insurance agent, real estate broker or anyone offering you an investment, request to see their securities license and write down the number. Then check to make sure they are properly licensed to offer you the investment program, and the program is registered with the SEC. If they do not have a license, or tell you they don’t need one due to their professional status, do not invest.

If you are being offered an investment, the person making the offer is required to provide you a prospectus.

Not all professionals are running illegal investment programs. You just need to be aware that it is happening, and more frequently than ever before. You must check everyone thoroughly before investing with them.

Remember: stop trusting and start verifying. Millions of people have been victims, don’t you be one of them.

Mission Viejo resident Lynn Edgington is the founder and president of Eagle Research Associates, Inc, a California 501(c)3 Public Benefit Charitable Corporation. Eagle has a dual mission: To educate the public about Internet investment fraud/Ponzi’s, and providing federal law enforcement agencies with their research assisting them with their investigations. Eagle exists through donations. Learn more about Eagle by visiting their website: Lynn is the author of “Robbing You With A Keyboard Instead Of A Gun – Cyber Crime How They Do It” available on