Schemes, Scams, Frauds.

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Unbelievable Investment Fraud Opportunities

This Deal Won't Fly

There tends to be a cyclical surge in illicit investment schemes involving exotic livestock (such as ostriches and emus). The ostrich deals are usually packaged as partnerships in which investors pay several thousand dollars or more for shares in "breeder pairs" of the animals, which are then raised on ranches, usually in the Southwest U.S.

The ostriches are touted as being the next non fat, low-calorie, food item fad headed for the dinner table of every American household.

One ostrich farm investment scheme advertises that you can get profits of 20-300% almost immediately. Investors are told that ostriches comprise the "agricultural industry of the century in a fully insured investment that has been called the cash crop of the decade." Investors are solicited to be "general partners" in the raising of $60,000 to purchase and maintain two breeder birds.

No mention is made of the extremely risky nature of the ostrich farming business, including breeding difficulties, disease problems, and an uncertain commercial market.

In fact, the existing market for the exotic livestock is so far extremely limited and uncertain. In addition, a number of the touted ostrich and emu ranches have been found to be either imaginary or vastly overblown in terms of size.

Culture Club

As many as 10,000 people lost money to promoters who charged $40 for packages of milk culture under the name of Culture Farms. The promoters stated that they planned to produce Cleopatra's Secret, a major new perfume that used the milk product as an ingredient.

Investors were told to grow the milk culture in their kitchen refrigerators and then to present the containers for repurchase by Culture Farms at a guaranteed price.

Before investors figured out that something smelled wrong, the investment soured, and more than $100 million in hard-earned savings were gone. The perfume never materialized in this ponzi scheme which initially shipped some repurchased materials from initial investors to new participants so as to create the illusion of a successful business model.

Sounds, Too Good To Be True

One stock promoter "invented" a process for growing plants using sound waves and special fertilizers. He claimed that his process caused plants to grow faster and healthier than with conventional growing methods. He called it "Biosonics" and applied for a patent. Bio-Sonics International was formed to promote and sell this invention. He began selling stock in early 1996 to finance the construction of a large demonstration greenhouse.

He told others that multinational corporations and foreign governments had expressed an interest in using Biosonics to produce food and that they would invest large sums of money if the project succeeded. He approached individual investors and urged them to tell their friends, families, and business associates about the stock offering. He later gave presentations to groups of potential investors.

The stock initially ranged from two cents to fifty cents per share and it was increased to one dollar per share in later transactions. Investors were not informed that the price was chosen arbitrarily by him and that no actual market existed for the stock. Investors would receive preprinted stock certificates indicating the number of shares purchased. About thirty people purchased these shares from him for around $1,600,000.

He did not disclose his prior business failures or that he had twice filed for bankruptcy, nor did he tell investors that all of the rights to the Biosonics patent had been previously assigned to a third party.

He did however send a letter telling shareholders that he had met with the managing director of The Mitsubishi Group and that final commitments had been made for Mitsubishi to provide $10 million dollars in financing to Bio-Sonics.

In addition, he claimed that agents of Bio-Sonics had met with the royal family of Saudi Arabia and that they were also prepared to provide $10 million dollars. He recommended that shareholders increase their respective investments in order to take advantage of potentially favorable stock transfer ratios and values in a buy back offer.

Shortly thereafter he appeared before the Securities Division and testified under oath that all funds raised in connection with the unregulated stock offering had been spent, but insisted that a buy-back offer was soon to be funded by an unidentified group of offshore investors.

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The King of Deals

You hear about a wonderful investment opportunity geared to raise $4 million, in units of $10,000, so that a partnership can produce several infomercials for various sure-fire products. The promoters say that an investment in one of their partnerships is likely to be so profitable that you will receive an initial 50% return within three to four months, and thirty days after that initial return you will receive monthly royalty checks for another three to four years.

The first partnership will make an infomercial to sell an Elvis Presley memorabilia package called "Elvis Immortal" that will include a compact disc featuring a previously unreleased Elvis Presley song, a coffee table book that includes hundreds of photographs by Elvis Presley's personal photographer, and a collection of Elvis Presley stamps.

If you invest now you will also have the opportunity to produce other infomercials, including ones to sell a book about Frank Sinatra, a book about Milton Berle, a yogurt maker, the "Flame Stopper" personal fire extinguisher, and a product called the "Kid Finder." They say the big retailers have sold, or have agreed to sell, thousands of their products, thus demonstrating the likely success of an investment in the partnerships.

They also say that earlier investors have already received a substantial return on their investments, such as a two to one return in just a seven month period based on sales of "Elvis Immortal".

They say they have been involved in the production of successful infomercials in the past, including infomercials for Vanna White's "Perfect Smile" Tooth Whitening System, the Ron Popeil Food Dehydrator, The Health Rider exercise system, and Susan Powter's "Stop the Insanity" nutrition and weight-loss program.

After sending away your cheque you belatedly discover that in fact, "Elvis Immortal" does not include a compact disc featuring a previously unreleased song recorded by Elvis or several hundred photographs by Elvis Presley's personal photographer; that an infomercial to market "Elvis Immortal" did not air on or around August 16, 1997, the twentieth anniversary of Elvis Presley's death; that Graceland, a division of Elvis Presley Enterprises, Inc., is not considering making "Elvis Immortal" the official book of Graceland; and that retailers have not sold or agreed to sell thousands of their products.

A Sure Bet That You'll Lose

You get a call from someone purporting to be an assistant to a Vice-president of Marketing at World Interactive. They say they are not a stockbroker, but are calling from the corporate offices of World Interactive, which is in the middle of a private offering, and ask if you would be interested in receiving more information about owning part of their online casino.

They ask if you can make an investment decision alone, and if so, whether you are, or can become, "liquid for up to $100,000". They then ask what you want in an investment.

Even if your answer is "safety" they continue by saying most people buy several preferred stock units (at $10,000 each) but that there are very few units left. If you show interest, they say that a Vice President for Marketing will call shortly.

The next call to you, often that same day, is from their VP of Marketing. The VP informs you that the company is selling 350 units of convertible preferred stock in a private placement. Each unit of stock has 2,000 shares, at $5 per share, for a total cost per unit of $10,000. According to the VP, most people purchase three to five units apiece.

He informs you that World Interactive is currently operating its Internet casino, Golden Chips Casino; that it is not yet taking live bets, but will be in the near future —typically, two to three months.

Golden Chips Casino offers blackjack, slots, video poker, roulette, craps, bingo, keno, Asian games, sports book (soccer, baseball, football, etc.), world lotto, and other games with progressive pools. The software offering these various games is described as "top of the line" and will enable World Interactive to become a leader in Internet casinos.

According to him, "You are in line to get in on the ground floor of an investment whose profitability ranks with that of "Microsoft, Netscape, and Yahoo."

"Why, just consider that the casino industry is a $500 billion industry." He notes that the large Las Vegas casinos purportedly generate $2-2.5 billion in revenue annually. He has you take note that the stock prices for casinos are high, purportedly running from $46 per share for the MGM Grand casino to $103 per share for Griffin Gaming. He uses all of these facts to lead you to the conclusion that World Interactive's casino can be as, if not more, profitable.

He claims that "World Interactive should easily do $100 million revenue in its first year, which is a conservative estimate." He also asserts that the company expects to make $500,000 in its first month of operation and should easily double that every month its first year.

You, as an investor, have three ways of achieving an astronomical return on your $10,000 investment. First, he expects to take the company public within one year and, according to "unnamed Wall Street underwriters," the stock should easily exceed $40 / share, or $80,000 for each unit you own.

You should hold onto your stock, however, because the second way for you to make money is through their profit sharing plan. Specifically, they will pay you a 20% fixed annual dividend, or $2,000 per unit starting in the first year.

Finally, the third way for you to make money is through a profit sharing program where they will pay preferred shareholders 25% of the profits, which would mean a $71,000 return per unit if the company makes the estimated $100 million in the first year. Thus, according to the VP, as a holder you can expect to make $150,000 or more in one year from each $10,000 unit you own.

He then asks if you have liquid funds,stressing that time is a factor in this investment because there are so few units left. He informs you that until recently he was sending the placement memorandum out by regular mail but because there are so few units left, and demand for the investment is high, he is now sending it out by overnight mail. He sets a time to call back and follows up thereafter. Anxious to take advantage of gamblers greedy natures you prudently invest in this surefire digital "Lost Wages".

You become worried when the date of the stock offering to the public is pushed back time and again. They say this is because of hurricane damage to the casino, an unexpected software glitch or advice from their market maker.

Potential investors in cyber-casinos should know that Internet gambling is not legal in any state and that fraudulent promoters traditionally overstate the profitability of casinos.

State Official Warns of Worm Farm Scam

12/25/03 - Hundreds of people, including several Connecticut residents, have lost money to an Oklahoma promoter of worm farms, he said.

B&B Worm Farms of Meeker, Okla., promises in ads to supply initial worms and supplies, then to buy back worms produced by contract farmers and sell them to gardening firms and nurseries.

At first the company pays for the worms, but eventually the company resells the worms to new contract farmers, rather than reselling them for a profit. This is known as a Ponzi, or pyramid, scheme.

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