SCAM alert. Have your "friend" talk to a lawyer or law enforcement immediately. Go to Google.com and put in Bank Note Scam to see how many references there are to this. I was even solicited for this scam whe I traded for an insurance Co.
e.g.
This is a scam of many names, which promises a very high return on your investment. The storyline usually begins that there is an entire banking and trading system which is not open to the general public. This sort of trading produces pheonomenal returns, usually at least 50% for short term trades, but often more like 2,000% returns per month with no risk.
This is of course foolish, and anyone who believes this is too dumb to keep money and should give everything they have to charity before they lose it to the scam artists.
The Pitch
Lots of variations, including:
"There is a secret private banking system which is only open if you have $1 million or more. Therefore, if you pool your money in with other investors you too can participate in this institutional trading and also make at least 50% on your money in the short term. I have already got $1 million in it with other people, so if you put your money with me I can get you the 50% on it."
"You can put your money in a big nationally-known bank, in your name, and with only your signature. However, you have to make this available to me in a letter-of-credit for trading. You're not going to lose anything, so don't worry about this. For letting me trade your money, I can get [choose one: 20% per month, 20% per week, 20% per day, 20% per minute, etc.] with absolutely no risk to you."
The Scam
Variation #1: You are skeptical so you only place $1,000 with the promoter. A week later, the promoter gives you $1,500 back. You are amazed, but still a little skeptical. You then place $20,000 with the promoter. A week later, the promoter gives you $30,000 back. Wow! You then give the promoter your life savings, say $200,000. Two weeks later you hear nothing, so you call the promoter (if you can find him). Ooooops, he says, that particular trade didn't work and you lost all your money. Sorry. "Oh by the way," the promoter tells you, "what you were doing was very illegal under the securities acts so whatever you do don't say anything to anybody else you will go to jail for securities violations."
Variation #2: You invest some money, say $10,000, and it does start paying you back at $1,500 a week. You think this is fantastic and start getting all your friends into it. They invest some big money, and get their friends into it. Then, after a couple of weeks (and well short of recovering your investment) it completely stops and you can't find the person who sold it to you. Or, you are given some hokey explanation as to why the payout stopped.
Variation #3: You invest some money, say $1,000. A couple of days later, the scam artist comes to you and says "You have done really, really well. You're $1,000 is now $25,000." You are thrilled, and invest your entire life savings of $350,000. This generates monthly reports to you showing that your investment has grown to $73 million. You show these reports to all your friends and get them into it, too. One day, however, you attempt to get a small portion of this money back to buy your vacation home. The scam artist tells you that the money was actually lost in bad trades, but if you help bring some more people into the program he will see what he can do to get you a few thousand dollars.
Variation #4: This is the most common variation. You invest your money and it disappears. End of story.
Variation #5: We've seen this variation more as word of the scam goes around and the scam artists have to become more sophisticated. You are talked into putting your money into a nationally-known bank, with only you as the signatory, but you also sign a letter-of-credit in case the promoter's trade doesn't work (which he assures you the trade will work). Unfortunately, the trade doesn't work, the letter-of-credit against your account is exercised, thus cleaning out your account -- and you lose all your money, even though you maintain sole signatory capacity over the account.
Variations #6 through 1 Million and 1: There are a zillion variations on this scam.
Comment
Quite a few people have fallen for this one, mostly because of their greed in getting the promised 50% to 2000% returns per month. Well, even the big, institutional banks don't ever get these kinds of returns -- as stated above, the institutional banking system probably only saves them 1% to 2% in expenses because they are doing block trades between themselves. Representations of these kinds of returns are a complete lie, and you should contact your local state securities administrator, as well as the Federal Bureau of Investigation immediately if you are approached to get into one of these things. What the promoters are doing is simply pyramid scheming by using the money from one group of investors to show profits to a subsequent group of investors, and then simply pocketing each investors final big gamble.
Want to See How One of These "Secret" Programs Really Works?
Then check out Omega Trust & Trading Ltd., one of the biggest Bank Debenture Trading Programs of all time! It was supposed to be "one of only five or six really legitimate programs of this type in the whole world".
THE LIES MADE TO PERPETRATE THE SCAM
"A big lie is more plausible than the truth."
-- Ernest Hemingway
Complete Lie: "There is a secret banking system where the big banks make astronomical returns, and you can't participate unless you pool with others or place your money with someone who has an place in the system."
This is a COMPLETE LIE, and anyone who says this is a scam artist. We regularly work with the major offshore banks, and have any friends and acquaintances at these banks, and can tell you that they laugh at the allegation that there is a "secret" banking system which produces crazily high returns as the promoters of the bank debenture scam suggest. For instance:
Barclays Bank recently held a seminar for the offshore services sector which laid emphasis on the anti money laundering procedures now in place. They also made mention of the ingenious methods being promoted by those in society who make a profession out of parting the unwary from their wallets. Specifically these are the "High Yield Investment Programmes", "Roll Programmes", "Bank Debentures" etc., etc. In spite of all the warnings, these still appear with monotonous regularity touting enormous returns and, as Barclays point out, using impressive phraseology that does not appear in the banking dictionary. Neither will the promised returns appear in your bank account. We had a call the other day from a gentlemen who asked if we could find a bank to accept his forthcoming payouts of a mere $130M per week! We suggested he call back when he had the first week's proceeds in hand - we're not holding our breath, however.
Newsletter of International Trade & Investments Ltd. (Nassau), September 1998 edition.
COMPLETE LIE: "The U.S. government is covering up this secret banking system."
This is a COMPLETE LIE that the U.S. government is somehow covering up this phantom banking system. This is NOT TRUE and anyone who says this is a scam artist. First, as shown above, it doesn't exist. Second, trading in currency is tightly monitored by literally hundreds of private groups worldwide, and even a small trade would instantly be recognized by these private groups.
COMPLETE LIE: "The program uses International Chamber of Commerce Approved Forms."
The International Chamber of Commerce does NOT approve forms for these programs, and anyone who claims this is a scam artist. To the contrary, the International Chamber of Commerce has put out warnings that it has not approved any such forms, and that forgers are illegally making up such documents without either the knowledge or approval of the ICC. Other forgeries which have been found include forgeries of documents purporting to be from the U.S. Federal Reserve Bank (FRB), the U.S. Department of Treasury, the Bank of England, and even the Queen of England!
If you see anywhere in the scam artists' materials that they or their forms are "approved" by the ICC run! This is the baldest of lies.
COMPLETE LIE: "These securities do not need to be registered with the U.S. Securities & Exchange Commission or the State Securities Commission of the state wherein they are marketed or sold."
This is NOT TRUE and anyone who says this is a LIAR. To the contrary, when legitimate bank debentures are sold to the public, they are ALWAYS registered with the Securities Commission of the state wherein they are sold, and in most cases are also registered with the U.S. Securities & Exchange Commission. IF YOU CANNOT CALL YOUR STATE SECURITIES COMMISSIONER AND CONFIRM THAT THE DEBENTURES HAVE BEEN REGISTERED, IT IS ALMOST CERTAIN THAT THEY ARE BEING MARKETED AND SOLD ILLEGALLY.
Private Placement Bullshit: Many scam artists will pitch that their schemes are somehow exempt from regulation because they are a "private placement". The truth is that many states require private placements to be registered, and at any rate if the scheme raises over $2 million aggregate amongst the states (i.e., $2 million anywhere) it MUST registered with the Securities & Exchange Commission!!!!! So, if someone says that they have raised $20 million dollars but they are not registered, it ain't a legitimate deal.
COMPLETE LIE: "There is a major U.S. bank which guarantees these instruments."
This is NOT TRUE and anyone who says this is a LIAR. The scam artists will tell you that they cannot disclose the identity of the U.S. bank which guarantees the investment, or else will tell you the name of whichever bank they pull off the top of their head, but either tell you that you should not contact the bank directly, or they get one of their scam artist buddies to call you up and represent that they are a bank officer. No U.S. bank participates in these schemes, period, and many of them issue warnings to the public not to get involved in this scams.
A recent variation of this scam is for the scam artists to set up an offshore bank with a name which is very similar to an international bank, such as "Barclays International Bank" (which doesn't exist and plays off the Barclays name). These offshore banks never have any real assets or backing, and their guarantees are worthless.
COMPLETE LIE: "Others have made money with these programs."
Nobody except the scam artists have ever made money with these programs. A few people have gotten a small portion of their money back, usually for helping the scam artist scam somebody else, and that is it. We've seen hundreds of these scams the past year, but not a single person who could actually document that they made even a single penny over what they invested into it.
People who claim that they have made money on these programs always fall into one of two categories:
Ringers, being persons set up and in cahoots with the scam artists to claim that they have made money; and
Suckers, folks who have been scammed and are now going along with the scam artist on the condition that the scam artist will repay them a portion of their money lost for getting new suckers into these programs.
COMPLETE LIE: "These programs are back by or involved with the International Monetary Fund."
This is a total load of bull hockey. The IMF has repeatedly warned about this scam:
NEWS BRIEF No. 96/14
November 18, 1996
International Monetary Fund
700 19th Street, NW
Washington, D.C. 20431 USA
IMF AGAIN WARNS OF FINANCIAL SCHEMES MISUSING ITS NAME
In view of widespread and continuing inquiries from individuals and companies who have been approached by parties in connection with offers of participation in various financial instruments and schemes promising high returns and unauthorizedly using the name of the International Monetary Fund (IMF), the Treasurer of the IMF today again warned potential investors to beware of such schemes. He had already issued warnings in the past (see News Brief Number 94/5, published February 23, 1994 and News Brief Number 94/11, published May 13, 1994). Today he reiterated that the IMF does not issue or guarantee any obligations called "Prime Bank Notes," "Prime Bank Guarantees," "Bill of Exchange," or "Bill of Equity," or extend any credit lines through commercial banks or other agencies. Moreover, the IMF does not guarantee debentures or other financial instruments issued by a member country or any other entity. It does not sponsor investment programs, "high-yield financial programs," or issue to countries or to outside parties an "IMF Number," "IMF Country Registration Number," or an "IMF Approval Number for Projects."
Other examples of bogus instruments often featured in such schemes which unauthorizedly use the name of the IMF are:
fictitious stand-by letters of credit--falsely portrayed as risk-free and
sanctioned by the IMF;
securities allegedly backed by the IMF; and
bonds supposedly issued by the IMF.
The IMF is an intergovernmental organization whose financial transactions and operations are carried out directly with its member countries and only through a fiscal agency designated by each member for this purpose (such as the member's Central Bank or its Ministry of Finance). The IMF does not operate through other agents and it does not endorse the activities of any bank, financial institution, or other public or private agency.
IMF EXTERNAL RELATIONS DEPARTMENT
Telephone: 202-623-7300 — Fax: 202-623-6278
So, if somebody claims that their investment has IMF involvement, you know it is a total lie.
They Do Not Exist
Every couple of weeks, some sucker who is about to be scammed calls us and says essentially "I've read your website but isn't it possible that some of these might be for real?"
No! Hell No!
None of these are for real, for if no other reasons than that they are neither registered as a security nor do they make economic sense. If you can't find the proposed program investment in either the Wall Street Journal or the London Financial Times, and if it has not been registered with your State Securities Commissioner, then it is a scam. Any and all reasons why it is not so listed are the purest of lies.
During the course of the last several years, we have seen hundreds of these programs, but we have yet to see a real one! If there is a real one out there, we'd like to know because it would be the first. We're not holding our breath, however.
[Please do not send us information to evaluate these programs, unless you also send us the U.S. address of the promoter so that we can forward this information to law enforcement for them to check against their records.]
The Scam Within The Scam
Believe it or not, there a actually a bunch of scammers who are running a scam-within-scam by selling books which for only $149 relate how to be successful in bank debenture trading programs! Given the chance, these same people would probably sell books telling you how to spot the Easter Bunny.
Don't Believe Us? Then believe the FBI . . .
We get a surprising amount of hate-mail from the promoters of these schemes, almost always anonymously, telling us that we don't know what we are talking about here, even though we have excellent contacts with virtually all the major banks, worldwide, and none of those banks have ever heard of these programs! So, we have decided to quote from the Fraud Alert page of the U.S. Federal Bureau of Investigations:
What is a Prime Bank Note?
International fraud artists have invented an investment scheme that offers extremely high yields in a relatively short period of time. In this scheme, they purport to have access to "bank guarantees" which they can buy at a discount and sell at a premium. By reselling the "bank guarantees" several times, they claim to be able to produce exceptional returns on investment. For example, if $10 million worth of "bank guarantees" can be sold at a two percent profit on ten separate occasions, or "tranches," the seller would receive a 20 percent profit. Such a scheme is often referred to as a "roll program." To make their schemes more enticing, con artists often refer to the "guarantees" as being issued by the world's "Prime Banks," hence the term "Prime Bank Guarantees." Other official sounding terms are also used, such as "Prime Bank Notes" and "Prime Bank Debentures." Legal documents associated with such schemes often require the victim to enter into non disclosure and non circumvention agreements, offer returns on investment in "a year and a day" and claim to use forms required by the International Chamber of Commerce (ICC). In fact, the ICC has issued a warning to all potential investors that no such investments exist.
The purpose of these frauds is generally to encourage the victim to send money to a foreign bank, where it is eventually transferred to an off-shore account that is in the control of the con artist. From there, the victim's money is used for the perpetrator's personal expenses or is laundered in an effort to make it disappear.
While foreign banks use instruments called "bank guarantees" in the same manner that U.S. banks use letters of credit to insure payment for goods in international trade, such bank guarantees are never traded or sold on any kind of market.
Some Tips To Help You Avoid These Frauds:
1. Think before you invest in anything. Be wary of an investment in any scheme, referred to as a "roll program," that offers unusually high yields by buying and selling anything issued by "Prime Banks."
2. As with any investment, perform due diligence. Independently verify the identity of the people involved, the veracity of the deal, and the existence of the security in which you plan to invest.
3. Be wary of business deals that require non disclosure or non circumvention agreements that are designed to prevent you from independently verifying information about the investment.
Don't believe the FBI? Then believe the SEC:
The U.S. Securities & Exchange Commission has also run warnings on this scam:
SO-CALLED "PRIME" BANK AND SIMILAR FINANCIAL INSTRUMENTS
The Securities and Exchange Commission is alerting investors to the recent rise in possibly fraudulent schemes involving the issuance, trading or use of so-called "prime" bank, "prime" European bank or "prime" [Endnote 1] world bank financial instruments. These instruments typically take the form of notes, debentures, letters of credit, and guarantees. Also typical in the offer of these instruments is the promise or guarantee of unrealistic rates of return, for example, a 150 percent annualized rate of "profits." Common targets of these schemes include both institutional and individual investors, who may also be induced to participate in possible "Ponzi" schemes involving the pooling of investors' funds to purchase "prime" bank financial instruments.
On October 21, 1993, federal financial institution supervisory agencies [Endnote 2] issued an Interagency Advisory to their regulated financial institutions. The Interagency Advisory warned of the use of schemes involving "prime" bank financial instruments and noted that: * Individuals have been improperly using the names of large, well-known domestic and foreign banks, the World Bank, and central banks in connection with their "Prime Bank" schemes. * The named institutions "had no knowledge about the unauthorized use of their names or the issuance or anything akin to 'Prime Bank'-type financial instruments." * The staffs of the federal supervisory agencies are unaware of the legitimate use of any financial instrument called a "Prime Bank" note, guarantee, letter of credit, debenture, or similar type of financial instrument. * Financial institutions should watch for the attempted use of traditional types of financial instruments that are referred to in an unconventional manner, "such as a letter of credit referencing forms allegedly produced or approved by the International Chamber of Commerce."
As to this latter point, the Interagency Advisory referred to examples of "bogus schemes involving the supposed issuance of an 'ICC 3034' or an 'ICC 3039' letter of credit by a domestic or foreign bank." The Interagency Advisory also noted that many of the illegal or dubious schemes "appear to involve overly complex loan funding mechanisms."-- In the eyes of an unsophisticated investor, this complexity may make a questionable investment appear worthwhile. The SEC warns investors and those who may advise them, particularly broker-dealers and investment advisors, of this possible hallmark of fraud and reminds them of a basic rule for avoiding securities fraud, "If it looks too good to be true, it probably is!"
ENDNOTES
[1]- These schemes do not involve the offer or sale of financial instruments issued by any financial institution having the word "prime" in its name; rather, that word (or a synonym, as in the phrase "top fifty world banks") is used to refer, generically, to financial institutions of purportedly high repute and financial soundness.
[2]- These agencies are the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision.
See sec.gov |
