>>Subscribe via Email<<

Sports Arbitrage Investment Scams

Posted by Aegist on July 8th, 2010

If you have been approached by an arbitrage trading company which is looking for investors, do not give them any of your money. Companies which can promise to make you the returns typically claimed by these types of companies (5% will never need to seek out public investors. End of story. So any company which is cold-contacting members of the public looking for investors is without doubt a scam.

I am going to re-state the above point again so that you can understand it – because this is the only argument that should be needed. If a company can promise you a return higher than a high interest bank loan, then why would they need your money? Paying you such a high premium is an unnecessary expense when they could just get a bank loan, or get some money from friends to get it started and then grow their own capital exponentially until they have more than enough money and no need to share it with anyone.

If a company can make 10% profit each month (and most promise more than this) on an uncapped volume, then you do NOT need investors. Ever. Arbitrage trading can make about 10% return per month, per trader, up to a limitted volume – thus it won’t compound past a certain amount. Companies soliciting investors publicly are trying to get a lot more than the trading limit of an arbitrage trader can handle, and promising to pay out more than a team of arbitrage traders can make.

Scam Companies LOOK REAL

This is so important. They LOOK real. They don’t print “We’re a Scam” on their brochure or their website. They imply that they are supported or affiliated with respectable companies. They claim to be licensed and verified as reliable (they are con men! They LIE!). Their websites and brochures often look really really good. They have really nice sales people who really take care of you and try their best to help you and talk to you about their grandmother who is sick and relies on their pay check to get her medication….

None of that matters. It can all be faked. It can all be made up. What cannot be faked though, is the fact that any company promising to make you high returns on an arbitrage investment never actually needs investments from the public. So don’t fall for the glitz and the polish – stick with the logic.

Scammers Use Shills

A shill is someone who pretends to be a customer or potential customer of the company in question but is in fact an employee or owner of that company. Shills are also sometimes known as sock puppets. The important thing to learn about these shills is that they aren’t always obvious. They don’t just come in and say “I’m a customer, and I like this company” – they use numerous strategies (and often several identities) to acheive a result. For example:

• A genuine person will ask for information on a scam company, and after a series of warnings by regulars and experienced members, a shill will say “I’ve read through all of this thread but have decided to give it a try anyway. I know its a risk, but I am willing to take it. Wish me luck!”. The purpose of this type of shill post is to make it sound like the ‘risk’ is worth the potential ‘reward’, confusing the other readers into thinking that the risk is only a small chance, and that the reward might actually be realised. The fact is that the risk is virtually100%, and the potential reward is a red herring – it doesn’t exist!!
• Most commonly, shills will simply report that they have been able to withdraw money from the company without troubles. They invested money, their investment grew, and they have been using it like a bank account. How great for them. Too bad it is all made up, and they are just saying it to make it sound like people are making money, and YOU are missing out!!!! Don’t fall for it.

Some Arbitrage Scams are Ponzis, Some Aren’t

It is worth noting that some companies claiming to do arbitrage trading for your profit are in fact Ponzi Schemes which take investments in for a fixed period in order to enable them to actually pay out some of their members. They aren’t actually trading for you, what they are doing is using the growing pool of investment funds to pay the small percentage of people who reach the end of their investment period who request a withdrawal. These people are then so excited that they made so much money on their investment that they often happily re-invest the money, and more importantly, happily tell everyone they know how much money they have made and how great an investment it is. These people aren’t technically shills, but they have the same effect. They create positive buzz around the ponzi scam which brings in more money, which allows the scammers to eventually close up shop and disappear with much more money than they would have been able to get without this positive buzz.

The scams which aren’t ponzis though, are typically just outright theft. They claim to pay you back your money, but when it comes to the crunch, they just delay payments for a while before ceasing all communication.

There is No Rush

A side note worth making here, is that for every company that has contacted you, there seems to be 3 or 4 others actively trading who haven’t contacted you, and more companies to follow. So if for insane reason you aren’t immediately convinced by what I have said here, remember that despite what these slick salesmen say, there really is no rush. They will take your money in a week or two weeks or a month or two if they are still around. In fact, using a time buffer is a great way of seeing some of their lies. If they claim to be accepting no more deposits after this week (or anything else like that), then wait for a week and watch them change their story.

In general though, just remember that there is no rush. Many of these companies exist, and many more will come. Take you time, read what the Australian government says in all of its warning, and what all of the experienced arbers say on ArbForum, and just consider what it will feel like to lose all of your investment.

Understanding Arbitrage Helps Avoid Scams

One of the easiest ways to immunise yourself against arbitrage scams, is simply to understand arbitrage. When the experienced arbers call ‘scam’ against investment companies on the forums it is usually because the company claiming to ‘do arbitrage’ are publicly displaying their ignorance of arbitrage on their own websites. They show daily returns on total trading capital (often showing multiple trades each day), or they show $10,000 bets with bookmakers that only accept $500 bets. These sorts of details mean nothing to the average person, but to an experienced arbitrage trader, they are dead give away’s that the company in question has never done arbitrage itself and is a complete scam.

If you aren’t interested in spending 6 months or more getting experience in arb trading yourself, then you should give the experienced arb traders on arbforum and other arbitrage forums the benefit of the doubt when they recommend against investing in an arbitrage investment company.

History Repeats Itself

This has happened over and over again already. So many of these arbitrage investment scams have been created, have scammed people out of many thousands of dollars each, then run off in to the night. Some of them have been chased by media crews, some have been put in prison, some have been harrassed by ex-victims. But most of them get away with it and start up a brand new company and do it all over again – and this time, they use all that they learnt on the previous run and do a better job!!

Important Links and Warning

Australian Competition and Consumer Commission Document on Sports Investment Scams

Sports Arbitrage Schemes on ScamWatch.gov.au

ACCC Article on Sports Arbitrage Scams

Queensland Police Arbitrage Scam Investigation

Scam Section on ArbForum.Co.Uk

No Comments »

No Comments »

No comments yet.

RSS feed for comments on this post.

Leave a comment

You must be logged in to post a comment.