An ounce of prevention is worth a pound of cure. This axiom is particularly true in speculative investments. In order to have protected yourself, you should have followed my "20 Questions To Ask Your Con Artist" advice when this investment proposal was offered to you. You should also have followed my advice on ways to lower the risk in speculative investments. Further, you should have had the speculative investment evaluated by a third party. Following those rules will keep you from getting into other scams and fraudulent investments.

However, your money may not be lost, IF you act quickly. You may be able to get some or all of your money returned to you in an unprotected investment that you made in an unworkable or fraudulent business proposal.

Common Sense In Investing

You must use good financial commonsense after you've decided to invest in anything. It's possible, despite all your precautions, that you may have turned your money over to a swindler. It's also possible that a proposal that didn't start out to be a swindle might turn into one if the entrepreneur finds himself in financial trouble. Positive reports by the company may hide massive losses. I advise my clients to require online access to the company's books. This doesn't stop the swindler or desperate entrepreneur from cooking the books or jumping ship with the remaining cash. However, watching the company's books is a very good early warning system.

With the First Suspicion, Take Action Then

At your first suspicion that things aren't going well with your investment, it's time to try to recover your risk capital. Do so immediately, or you are certain to lose your money. And once you make the decision that you want your money refunded, never waiver from that course of action. Your decision could be based upon some facts that bother you. It might come from the firm's books or the fact that you can't easily reach or talk to the person running the company. You may not be getting documents or payments. Reports may not be sent in a timely fashion. Or information that you do receive is vague or at variance from what you had been led to expect.

Possible Recovery Scenarios

There are two scenarios in which the average investor has a chance to recover his risk capital, IF he acts firmly and before everyone realizes that the business venture was a failure or a swindle.

A. The company was started by an honest entrepreneur, who like most startup companies is now going into total failure mode. Action: You must make a demand for the return of your money with a warning that you will file criminal complaints with the County District Attorney as well as the State and Federal authorities. This warning often works. While the regulators rarely act upon a single complaint, the essentially honest entrepreneur is rarely willing to take that chance.

Check to see if your State has a SLAPP law. Under U.S. Law you can make any statement that is true and thus not be guilty of libel or slander. The SLAPP laws expand upon the Federal legal tradition and give you far more leeway in what you can say in public without being sued. If your state has a SLAPP law, add to your refund request that you will use the Internet and call-in radio talk shows to educate the public about the entrepreneur so that he will never be able to raise a dime in the future.

B. A swindler started the company and you must act before the swindler has concluded that the sting is over. The swindler has to believe that by silencing you, he or she will be able to raise more money than your settlement costs. Action: You need to act on your first suspicion, rather than having a "wait and see" attitude. Use the same criminal complaint and Internet/media warning. If you get your money returned to you, consider yourself very lucky.

California's SLAPP Law Protection

Beware the Oily Tongue Which Sold You In The First Place

Be aware, when you decide to get your money refunded, that the person who smooth-talked you into investing your money will use all his or her skills to persuade you to leave your money in the program. There will be (false) answers to all of your concerns. The promoter will have some explanation for all the apparent irregularities. And, no doubt you will be told that backing out now would be anything from contractually illegal to a terrible financial mistake. Swindlers figure that, every once in a while, some of their more fidgety investors simply have to be re-convinced. No matter the truth, you will be told that you are so close to making really big money or the investment now looks even more profitable than originally expected. Don't believe it! DEMAND the return of your risk capital. Some swindlers will then revert to threats against you and your family. While most swindlers have bad tempers, few swindlers will take violent action. Your best bet is to record your phone calls, as I noted in my "20 Questions to Ask your Con Artist" article. However, if you aren't willing to risk some threats, you won't get your money back.

Demand It Now

When you insist on a refund of your investment, insist on it immediately. Offer to pick it up yourself or by a courier service or offer to pay the cost of having it sent by overnight mail or wired directly to your bank account. Ask for a tracking number if the firm offers to send it by overnight mail. Demand a certified check and offer to pay for it. Don't settle for "it will take a week or two" or "the check is in the mail." As everyone knows, checks seem to be lost more often than any other type of mail! Give the promoter no more than five working days to have the payment in your hands or your bank account. If you don't get your refund, act upon your warnings to them. If you don't do so, your warnings become threats and are thus illegal.

Report, Report, Report

If you don't get your investment back (and the odds are you won't), or even if you do and still suspect a swindle, report it promptly to the appropriate authorities and regulatory officials. Doing so at least lets the regulators know that they aren't doing much to protect the public against White Collar Crime.

The Sad Bottom Line

Bottom line, the unfortunate reality is that very few victims of investment fraud ever again see a cent of their money. It's also a reality that the business of swindling will continue to flourish as long as unwary investors are prey for unscrupulous promoters. The time to be suspicious is when the speculative investment is offered to you. Flying slightly ahead of the other pigeons occasionally gets you your money returned. But starting your speculative package review with a "Show Me" attitude and reliance on outside consultants is by far the better strategy.
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