How Self-Directed IRA Owners Can Spot Ponzi Schemes – Before It’s Too Late

Most of our Self-Directed IRA clients at American IRA are comparatively savvy, experienced investors, and so rarely fall prey to investment scams. However, every year, a few Self-Directed IRA owners and others get deceived by professional con artists and sociopaths, and get ensnared by a Ponzi scheme.

According to Kathy Bazoian Phelps, a California attorney and author of Ponzi-Proof Your Investments – An Investor’s Guide to Avoiding Ponzi Schemes and Other Fraudulent Scams, December of 2016 alone saw two new convictions in pending cases involving Ponzi schemes, and the discovery of ten new illegal Ponzi schemes worldwide. Self-Directed IRA and all other investors should take note.

In one Ohio case, Brenda Ashcraft, 46, was convicted of defrauding 34 people out of $4.2 million. She sought out investors to contribute funds to her company, French Manor Properties, but didn’t use the money to buy any actual properties, but instead treated herself to Cancun trips, spas and resorts and Cincinnati Reds season tickets. She was sentenced to eight years in prison.

With the Reds 68-94 and tied for the worst record in the National League Central Division last year, it just wasn’t worth it.

In another case, the SEC brought charges against two men who defrauded 100 people of more than $5 million – many of them Self-Directed IRA investors. The two fraudsters, Ephren Taylor and Randy Poulson, duped a Self-Directed IRA custodian into helping them recruit investors from among their clients, though an SEC magistrate cleared the IRA custodian of wrongdoing.

Still the criminals are out there, and the news underscores the need for Self-Directed IRA owners to be vigilant, and to conduct their own due diligence on prospective investments. Self-Directed IRA owners tend to prefer alternative asset classes that are not registered with the SEC, or not widely followed by independent analysts and investment banks. This is a big reason why alternative assets can be so attractive: Investors pay a premium for liquidity, research, and compliance with SEC regulations imposed on publicly traded securities. So alternative asset classes can represent terrific value. But Self-Directed IRA owners should watch for these warning signs:

  • Investments that generate returns far and above what other similar investments in that asset class are generating for no discernible reason.
  • Investments that are suspiciously consistent. If they aren’t moving with assets that should be highly correlated with them, find out why.
  • Sellers who are not private parties or direct owners are not licensed to sell whatever assets they are trying to get you to buy.
  • Secretive or complicated strategies you don’t understand.
  • Any ‘business’ with no recognizable product or service, other than finding more investors.
  • You are pressured to recruit more investors
  • No demonstrated revenue from operations
  • You cannot visit the property, or verify the seller’s ownership through third parties.

American IRA, LLC, specializes in working with people who want to explore self-directed strategies within their retirement accounts. Often this means they own non-traditional assets within their retirement accounts, or plan to. With over 30 years of experience in Self-Directed IRA strategies, founder Jim Hitt is one of America’s leading experts in Self-Directed IRA transactions.

For more information, or to schedule a no-obligation consultation, contact American IRA, LLC today at 866-7500-IRA(472), or visit our vast library of informative articles and blog posts at www.americanira.com.

We look forward to working with you.

 

 

 

 

 

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