A licensed insurance agent, Kenneth “Ken” Bridenstine is the owner of Wealth Consultation, Inc., an insurance firm in Centerville, Utah. In this position, he provides a range of consulting services and operational support to financial professionals with a goal of optimizing sales results. Prior to establishing Wealth Consultation, Inc., Ken Bridenstine served as a fraud analyst with E-Trade Financial.
Investment fraud can take on many forms, from Ponzi schemes to microcap fraud. It is important for investors at every experience level to familiarize themselves with all forms of fraud, as inadvertently committing fraud can still trigger an investigation. Some of the more common fraud schemes include the following.
Pump and dump schemes. This occurs in two phases. First, promoters seek to inflate the price of the chosen stock with misleading or outright false claims about the company in question. Next, after the price of stock has risen, fraudsters sell their shares before the stock falls to its actual value.
Precious metals fraud. A specialized type of fraud that promises high returns related to the increased value of metals such as gold and platinum. Investors rarely see the promised profits, largely because their investments go toward paying the fraudulent party commissions and covering any unforeseen fluctuations in the value of the metal. In fact, most investments are never used to purchase metals at any time, though investors are often charged additional fees for storage.
Pyramid schemes. Perhaps the most well-known form of fraud. It involves a single person or group requesting money from subordinates under some promotional guide or product that may or may not exist. Pyramid scheme participants, unknowingly or not, are simply used to recruit more participants, who increase revenue for higher-ranking members and are enlisted to seek out more new recruits as well. Pyramid schemes, by design, ultimately collapse, and the vast majority of investors never see any returns.
