Fraudulent T-Bills / Bonds / CD & GIC Investments
Con artists know that certain people will only invest in secure "non-stock" investments so they tailor their scam to mimic government-backed conservative securities.
"Limited Edition" Treasury Securities
Certain foreign individuals and groups are attempting to sell fictitious securities referred to as "Limited Edition" Treasury securities. As part of this scheme broker-dealers and banks are being approached to act as middlemen.
The sales pitch misrepresents the way legitimate U.S. Treasuries may be issued, bought or sold and describes the offering as:
- having a term of 10 years,
- yielding an annual interest rate of 6%,
- requiring a minimum purchase amount of $100 million,
- having an initial price of 57% of face value,
- having an unspecified offering amount (available for sale until "exhausted"), and
- being issued in physical (paper) form.
There is, however, no such security as a "Limited Edition" Treasury security. They are often simply window-dressing for a prime bank or ponzi scam.
The Forms in which Marketable Treasury Securities Exist
Marketable U.S. Treasury securities only exist in three forms: (1) book-entry, (2) bearer, and (3) registered. An overwhelming amount (99.84% of outstanding marketable securities) are in book-entry form which exist not as printed certificates but rather as computer records.
Only .14% exist in bearer form of printed certificate with interest coupons attached but no name on it. Finally, an even smaller percentage (.02% of outstanding marketable securities) exist in registered form with the name of the owner on it. They discontinued the issuance of printed registered securities in 1986.
Scams Involving the Renting or Leasing of Treasury Securities
Cons pretend to "rent" or "lease" Treasury securities which either don't exist or are not even owned by the party making the offer.
If you ask a leasing scam artist to produce the securities or prove ownership, they may be unable to do so and will offer excuses such as "they are frozen at my bank;" "a wealthy philanthropist has assigned them to us to assign to others for infrastructure or humanitarian purposes in third world countries and wishes to remain anonymous;" or "bank secrecy laws of this country prevent such a verification."
Misuse of Public Debt Forms as Evidence of Ownership
Scam artists often misuse documents or forms as "evidence" that they hold the securities and claim that the forms can convey official ownership or title to the securities listed on them.
They will also use a valid CUSIP number of a Treasury security that trades regularly in the market so you can get pricing information and confirm issue of the security. The trouble is that it identifies an entire issue not a particular individual certificate security, nor does it indicate ownership.
They may claim that their fraudulent offering has been certified by an official body such as the International Chamber of Commerce. They may also claim that it is a special issue to the United Nations to pass on to other companies that are willing to do humanitarian and infrastructure projects in developing countries.
U.S. Treasury Bills - One Year "Fresh Cut"
One person who represented himself to be a consultant to lesser-developed or Third World countries offered $500 billion worth of One Year "Fresh Cut" Treasury Bills which did not exist.
"U.S. Dollar Bonds"
Fake bonds, said to have been issued in the 1930's by the CIA to help Chiang Kai-shek fight the communists, and buried in caves by his generals and their heirs for years, have recently been "unearthed".
They are now being fraudulently offered to people at a fraction of their face value.Many inquiries come from West Coast law firms that are checking on the validity of these bonds for clients that reside in China, Singapore and Taiwan.
Most of these fictitious obligations refer to the Ministry of Finance of the United States and the Washington Bank of America neither of which has ever existed.
"Federal Notes" and "Tiger Zebra" Bonds
There are even old $100 bills that have been altered to read "$100 Million Dollars" and bogus coupons printed in a foreign language. The U.S. has never issued "Federal Notes", "Tiger Zebra" Bonds, a security with a denomination of $100 million, or a security with coupons in a foreign language.
"De-facto" Treasury Securities
This term usually appears in offers to assign, rent or lease Treasury securities for a fee, for a certain time period. These securities are bogus for the U.S. has never issued any "de-facto" Treasury securities.
Philippine Victory Notes
Philippine Victory Notes, which were issued in 1944 by the Philippine Government, were for use only in the Philippines, which at the time was a dependency of the United States. After July 30, 1967 they were considered de-monetized or valueless. If these notes are presented to you and purported to have current value today, it is a scam.
Historical Bonds
Historical bonds, such as railway bonds, which were once valid obligations of American corporations, but are now worthless as securities and only collected and traded as memorabilia, are quickly becoming a favorite tool of scam artists who will say that they are "payable in gold" and "backed by the U.S. Government".
Scam artists will sell historical bonds to unsophisticated investors at inflated prices far exceeding their fair value as collectibles. They often use third-party valuations, which state that the bonds are worth millions or billions of dollars each, to do so.
All of these false assertions have been used to defraud investors into paying as much as $150,000 for historical bonds that regularly trade for just $25 in collecting circles.
If you contact the Federal Reserve and discover they won't can cash in your bond for $8 million the con man will say that the Fed simply doesn’t want you to cash it in because if every one did so there would be a run on the bank and the economy of the US would collapse.
They will then suggest that you use their ‘hypothecated value’ of $8 million to play the secret Prime Bank Investment market which you are now eligible for.
Historical bond fraud is now so widespread in the US that the Securities and Exchange Commission recently held a conference in Denver, Colorado to address the problem.
Criminal Desires
Many investors in the financial marketplace are comfortable with CDs and GICs because they understand them to be federally insured. One broker fraudulently marketed Certificate of Deposits (CDs) worth at least $26 million to more than 400 mostly elderly investors by:
- offering CD investments without disclosing that investor funds were being pooled to purchase CDs that would remain in the company's name and not that of the investors,
- failing to disclose that investors would be charged "up front" commissions of 43%,
- failing to disclose that many of the CDs purchased were "zero coupon" CDs which would not reach maturity for 15-25 years and,
- failing to disclose that the investors could not sell their interests to anyone else.
The investors in this case were not buying CDs at all, but were in effect investing in CD Services, which was paying them only a fraction of the profit it was making, charging huge undisclosed commissions and using victims' money to buy CDs in its own name.
A Loan With a Groan
The owner of Texas based Abba Funding engineered an investment scheme with a twist involving approximately $9,000,000 from eighty investors, many of whom were senior citizens.
A typical investor paid $100,000 and believed he or she was buying a federally insured $100,000 CD. He would actually use the investors' money to purchase the CD's, but he then used them as collateral for loans made out to him personally which he proceeded to spend. He was able to do this because many investors were deceptively induced to sign a contract naming him as the "Trustee" of their money.
While his newspaper ads stated, "… the CDs purchased from federal banks to secure the Certificate of Deposit Program are insured by the FDIC", his clients' investments were actually only insured by a single private insurance policy which covered just a small amount of their money.
The scheme inserted CDs and bank loans into the scheme but the effect was the same. The victims lost their money when he defaulted on the loans.
Cause I'm The Taxman
Even though he had used his part-time position as a bookkeeper to defraud one business out of almost $28,000 between November 1996 and February 1998 Alberto Migel Fretes, 47, still managed to keep his job as an Alberta Treasury tax auditor; at least until he was accused of selling nearly $1 million in bogus government bonds.
While pleading guilty to three counts of fraud over $5,000 he admitted defrauding one investor out of $420,000 and another out of $100,000 as part of a scam involving phony savings bonds.
He told investors that he would invest their cash in special payroll savings bonds offered only to provincial employees. He said he would buy them in his own name and then hand over the supposed high-return profits when they matured.
The bonds, however, did not exist as investment vehicles.
He was released on a $32,000 surety bail bond with the conditions that he surrender his passport and the passports of his family, and remain within the boundaries of the city.
Initially reluctant to lower the bail, the judge relented after establishing that most of the money Fretes had earned in the fraud scam was either gone or had been seized in civil judgments.
Court heard $100,000 went to buy a hair salon business for his wife, which has since ceased operation, $50,000 went to pay for medical costs for his now-deceased father in Paraguay and $125,000 went to repay another victim.
As well, $70,000 was spent on a BMW, $15,000 on Rolex watches and $7,000 on an Alfa-Romeo, all of which were seized and sold.
