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Trendy Scammers Go After Crowdfunding, Self-Directed IRAs

John Waggoner, USA Today
Wednesday, 22 Aug 2012 | 12:16 PM ET

Technology isn't the only industry that's constantly changing: State securities administrators listed four new types of fraud among their annual list of investor threats.

The North American Securities Administrators Association's top 10 investor threats, released Tuesday, includes boiler-room staples, such as gold scams.

But the list has several new scams:

•Crowd funding and Internet offers. The 2012 Jobs Act loosens some of the rules for small businesses to raise money via stock offerings. Already, NASAA has noted 1,600 to 1,700 new Internet domain names relating to crowd funding, and the regulations permitting crowd funding have yet to be written.

•Bad advice from investment advisers. Thousands of midsize investment advisory firms have shifted from federal oversight to state supervision. Many firms that haven't been examined in a long time are being found wanting. State actions against investment adviser firms nearly doubled in 2011, NASAA says.

•Self-directed IRAs. You don't have to invest your IRA in stocks or bonds: You can use your IRA money to invest in real estate or even a small business. But you can also open yourself up to fraud. A scam artist can create a phony business for a self-directed IRA and bleed the account dry.

•Investment-for-visa scams. Foreign investors who put at least $500,000 into a new business can get a U.S. visa under the 20-year-old Immigrant Investor Program. Scamsters will tout the potential of big foreign investors to lure U.S. investors into a fraud, NASAA says.

Many longtime scams are flourishing, NASAA says. Gold scams remain popular because gold prices have soared in the past decade. In its simplest form, you get a pitch to buy gold, which the scam artist says will be held safely in a vault for you. In reality, there's no gold and no vault.

State securities administrators have oil and gas investigations in every region of the U.S., NASAA says. And if you're interested in flipping houses, scam artists are interested in flipping you.

Low interest rates and erratic Wall Street performance have driven many investors into the hands of fraudsters. "Those with worst intentions love to take advantage of headlines and popular ideas that stocks and Wall Street are not to be trusted," says Matt Kitzy, head of NASAA's enforcement section. "No investment is risk-free."

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