A church raises $250,000 for its building fund but is still years away from actual construction. Then the pastor meets an "investment expert" who claims he can turn the 1 percent return the church is earning on its building fund in a local bank to 30 percent or even 50 percent. The pastor is skeptical at first, but he eventually sees this investment opportunity as an answer to prayer. The board does too and votes to turn over the church's building fund to this "investment expert." Months later, federal investigators contact the pastor and explain that the church has been a victim a securities scam.
Sound unbelievable? It shouldn't. Investment scams have victimized many churches and church members, and no church is immune. Here are the four most common forms of securities fraud to watch out for.
1. Pyramid schemes
In the classic pyramid scheme, participants attempt to make money solely by recruiting new participants. The hallmark of these schemes is the promise of sky-high returns in a short period of time for doing nothing other than handing over your money and getting others to do the same.