Some new investors are understanding the hard way about the high number of bond scams that are out there. It’s easier for scam artists to sell phony bonds, or to misrepresent the performance of the bond to inexperienced investors. Many investors purchase the phony securities and don’t consider them again for years to come. How do you avoid being taken for a ride by crooks? It starts with awareness, dealing only with reputable issuers, and knowing the dangers. Here are the most common bond scams in circulation today.
1. Historical Bond Fraud/Railroad Bonds
The United States Department of Treasury, describes the Historical Bond Fraud. Historical bonds were valuable at one time, but they are no longer worth anything as securities. The bonds are collected and traded. They include railroad bonds issued by Canada, Saginaw, and Chicago Railroads as well as a few others. There are approximately 15,000 different historical bonds in circulation. While they're interesting for collectors, the reality of the matter is that they hold no financial value as securities. Scammers are selling them with the claim that they're worth the face value. Other fraudulent bonds that have surfaced include old bonds from the Mad River and Lake Erie Railroad Co, East Alabama, Cincinnati Railroad Co, Galveston, Houston & Henderson Railroad Co, York River Railroad Co, and Richmond Railroad Co.
2. Bond fraud
Scammers have also used the Noonday Mining Co. bond scam. Quatloos reports that these are historical bonds. Scammers convince their victims that these bonds are payable in gold through the United States Government. They assert that there is a special sinking fund that is used to recover the face value of the historic Noonday Mining Co. bonds. This can be a complete and total lie. They aren't payable in gold or through every other method. The mining bonds are worthless unless you want to keep them for collectibles.
Claims were created about the enforceability of the value of historic bonds. There have been quite a few collectors who were owning them. In addition, there were those who have bought historic bonds, believing the lies that they are told about the financial backing in the US government and the value of the bonds during the time of purchase. The situation escalated into a legal action that was heard in the supreme court with pondering of the facts and a ruling after a thorough examination of the situation. The courts ruled in 1996 that such bonds aren't valid obligations. Scammers also claim that they are backed by the US Treasury Department. These bonds have never been backed by the Treasury, making this yet another lie.
3. Historic bond trading programs
Another scam that is perpetuated with historic bonds is really a high-yield investment trading program. Scammers declare that these programs are backed through the Federal Reserve Board, a Federal Reserve Bank, the United Nations, the World Bank, or the International Chamber of Commerce. They are all scams that have been composed to sound like a legitimate investment opportunity. There is no such program. The IMF has frequently been named as a financial backer of this type of bond scheme and it warns consumers to avoid becoming a victim. Con artists who found that there were more savvy investors in the world who couldn’t be duped into buying the worthless historic bonds devised the text trading program scam to make the investment sound more legitimate. Although some still fell for the old con, others have learned the hard way that something that sounds too best to be true, is likely to be a scam.
4. Limited Edition Treasury Securities Bond scams
Treasury Direct warns consumers concerning the Limited Edition Treasury Securities bonds scams they have recently investigated. This vile scam involves individuals and groups from foreign countries who start to sell fictitious securities that they claim are backed by the US Department of the Treasury. They incorporate the names of well-known banks and brokers/dealers to ensure they are sound legitimate. The US Department from the Treasury denounces these scams for what they are. There are no special limited edition securities issued or backed through the US government. They are completely composed. Watch out though. Scammers are crafty plus they obtain information about legitimate securities in their elaborate hoaxes. They use a few of the language that is commonly associated with the descriptions, so it’s simple to be taken in by their lies. Only deal with TreasuryDirect when purchasing any kind of US-backed security.
5. Morganthau Federal Notes and Bonds scams
You ought to be on the lookout for bogus securities that are called Morganthaus. These fake notes and bonds are named after the Secretary of the Treasury from 1934, Henry Morganthau. The notes are forgeries which are believed to have their origins within the Philippines. The lie that is perpetuated to sell the notes is that the United States had them shipped to the freedom fighters in the Philippines during the era of World War II for the purpose of easing the war effort. Some of the notes are sold in boxes that are called “Federal Reserve” boxes. The scammers sell all of them with other certificates including FDIC Insurance, Global Immunity, and Gold Bullion certificates. Even though the notes are fairly crude within their design, this is explained away because of their supposed date of print. The US Department of the treasury has debunked these notes and bonds as fraudulent. They aren't a currency as claimed by a few scammers, and they are not bearer bonds. They're worth nothing more than the paper that they're printed on.
It’s a good idea to be suspicious of any federal notes or bonds that are not sold directly by the issuing party. US Treasury backed bonds are sold by TreasuryDirect. They require a user account that is protected by special security measures to keep your information safe. Don’t be taken in by any of the thousands of bond scams which are out there.