How are prime bank and promissory note frauds operated?

Question

What will be an ideal response?

Answer 1

International defrauders invented the prime bank note investment scam, which promises extremely high yields in a relatively short period of time. They claim to have special access to investments that are usually "limited to only the very wealthy." The yields promised range from 5% per month to hundreds of percent annually. Victims are told that their money will be pooled to trade in prime bank notes, prime bank guarantees, prime bank debentures, letters of credit, bank purchase orders, zero coupon bonds, or other official sounding instruments. Victims believe that such instruments can be purchased for a steep discount and then quickly resold for a substantial profit. They may also be advised that the profits are so vast that the International Money Fraud or the Federal Reserve Bank requires that a certain percentage of it be spent for charitable relief in third-world countries or elsewhere, which adds respectability to the pitch. The funds are actually sent to overseas banks in Geneva, London, or elsewhere. From there, they are transferred to off-shore institutions, where they are laundered, and the victims' money disappears. As is frequently the case in many types of frauds, this one can also be operated as a Ponzi scheme. Although individual investors are frequently victims, units of government are sometimes reeled in by the scheme-for example, the city of Clovis, New Mexico, lost $3.5 million in a prime note investment fraud.
A promissory note is essentially a short-term written I.O.U. that promises to pay its holder, the investor, the fixed amount invested plus a fixed amount of interest at some specified date in the future. Although promissory notes can be legitimate investments, those that are mass-marketed, sold door-to-door, or promoted on the Internet or through telemarketing are often scams, which amount to some $300 million annually. Most promissory notes have to be registered as securities with the Securities Exchange Commission and in the states where they are to be sold, but notes with maturities of nine months or less may be exempt from being registered. Therefore, when notes are not registered and mature in nine months or less, it is another sign that a scam may be in the offering instead of a great investment opportunity. Legitimate corporate promissory notes are not usually sold to the general public, but to sophisticated buyers who conduct a due diligence search before investing. The fraudsters recruit a sales staff with lucrative commissions ranging from 20% to 30%; frequently, life insurance agents known and trusted in the community are recruited for this role. These agents do not have a license to sell securities and rely solely on the information their employer provides, which later turns out to be false or misleading. Enticed by promises of a 15% or 20% return on an "insured, guaranteed, no risk investment" and dealing with someone who is familiar to them, few victims ask any tough questions. The pitch may include statements that reinforce the notion that this is a no risk investment, there is substantial collateral, and the investment is insured against loss. The money raised by the promissory notes may be needed to "open oil wells that were capped years ago because they were unprofitable to operate then, but new technology now makes it profitable to bring them on line." The notes may also be associated with activities such as "bringing out new products, funding a new television show, helping a real estate company acquire prime land for development, modernizing a Mexican gold, Colombian emerald, or South African diamond mine, or financing an e-commerce venture."
The fraudsters may simply take the money and run, leaving their unwitting sales agents to face charges, or operate the investment fraud as yet another variation on a Ponzi scheme. Promissory note fraud is also run as a type of affinity fraud.