"In these tough economic times, it is difficult enough trying to achieve above average returns on your investment capital without having to constantly guard your back against potential scam artists. However, if there has been a silver lining surrounding this recent recession, it has been the uncovering of unscrupulous fund managers and their cleverly designed tactics bent on deceit. As the financial tide receded, investors demanded withdrawals that could not be funded, thereby revealing the ongoing fraud. Bernie Madoff was but one swindler out of many that have been caught and convicted.

New Ponzi scheme revelations seem to occur weekly in the financial press. The common link between all of these frauds appears to be an early promise to investors of extremely high returns, typically with assurances of little risk or even guarantees. This genre of fraud falls under the classification of “High Yield Investment Programs”, (HYIP), which can encompass any fraudulent investment program that promises incredible returns, sometimes as high as 100% per year. Investors that want to get rich quickly or that cannot temper their greed are often the victims of these swindles. There are actually HYIP rating services on the Internet that attempt to educate unsuspecting investors as to the perils of these questionable firms that try to appear legitimate.

One investment medium that is often used by the criminal element is forex trading. Uninformed investors tend to believe the hype in the industry about high returns, especially when leverage is employed, and the complexity of this alternative investment vehicle creates a veil of secrecy that makes high returns seem that much more believable. The Commodity Futures Trading Commission, or CFTC, is the regulatory body with oversight responsibility for the forex industry. It has done much to police fraudulent fund managers within our borders, but foreign jurisdictions present a safe haven for operating online schemes of this type. In any event, its website specifically warns consumers to beware of any HYIP that promises much with little risk to consider.

One creative fund manager in Minnesota, Trevor Cook, raised over $190 million from 1,000 investors by promising double-digit returns from forex scalping with Islamic banks that would forego charging interest. Initial deposits paid for a downtown mansion that was equipped with numerous flat screen monitors with charting software to give the impression of a high-volume trading environment, which actually was never the case. The CFTC described the fraud as “massive” and admitted that it was one of the largest that focused on forex trading. Cook copped a plea agreement this past April after admitting to his crimes. Authorities have recovered something short of $30 million.

With the preponderance of fraudulent activity in these programs, investors are still drawn to these fund managers in hopes that double-digit returns are easily achievable by so-called experts in the industry. Most programs that attempt to be legitimate have complicated payment terms that deliver profits on some agreed upon timing basis. It is wise to understand these payment terms before opening any account and making a deposit.

Since the risk profile for these plans is high, only small portions of one’s portfolio should be dedicated to these fund mangers. Investing in these schemes borders on gambling, and funds invested should be limited to those amounts that one can afford to lose. Be sure to perform as much due diligence as necessary to satisfy your own requirements and take advantage of independent review websites before choosing your business partner. Remember that this person will be responsible for your hard-earned capital, even if you never meet him face-to-face. "

By Jennifer Gorton from Forex Traders.