Institute for Financial Learning - How it All Works |
 The Biggest Investment Scam in Canadian History? Why would a rock-solid business need to pay 40% to investors for the money it borrows? Protect Yourself (knowledge is power!): Every year, investors lose their life savings to con artists. You are not immune! See the attached pamphlet: “Protect your Finances” for more details. Note the enormous similarities to the IFFL's operations. Additional reference: Alberta-British Columbia Investor Alert The IFFL is a scam The IFFL has raised over $400 MILLION or much more from unsophisticated investors, many of them elderly. In the summer of 2007 they halted all repayments to investors, but continue their fundraising from the unwary public. This scam is in its final death-throes. Step 1: Invent a "business" of some kind and convince people it's wildly profitable. Induce a few people to invest ("early investors") by promising huge returns and complete safety of investment. Step 2: Pay early investors huge returns, exactly as promised. They become excited and invest more, and tell their friends and associates, who also invest ("later investors"). Use the funds from later investors to pay returns to early investors. Convince most investors to leave all their money in the scheme allowing it to compound, rather than receiving a regular payment. Step 3: Repeat Step 2 as long as possible. The scheme will sustain itself so long as a) it continues to grow quickly so there are enough new investors to pay the old, and/or b) Few investors actually demand payment of their principal and income. Step 4: Since there is no profitable company and therefore no money underlying these false promises, when growth slows and / or investors demand their money, the fraud cannot sustain itself. Promoters freeze payment to investors and begin stalling for time by any number of vague excuses, hoping the authorities step in and shut them down. Step 5: There are laws against frauds, but not against business failures. So scam artists create a planned business failure "due to unforeseen circumstances". If authorities shut them down, the scam artists have yet another excuse not to pay ("We'd love to pay you, but those damn securities regulators have frozen all our money"). Many investors will go to their graves blaming the authorities, rather than the actual con artists. Step 6: Take ill-gotten gains (often people's life savings) and quietly leave the country. In the summer of 2007, the IFFL suspended payments to all investors. They are at step 4/5, and are stalling for time. See link to halted payments. An example is attached of a recent Ponzi scheme (Pinnacle Development) in Atlanta, where the promoter claimed to be buying and selling ("flipping") houses in an overheated market. This fraud was unmasked with the help of the Fraud Discovery Institute (www.frauddiscovery.net) in San Diego, and turned over to the US Securities & Exchange Commission (SEC). Astute investors looked beyond the wildly profitable claims, recognizing that flipping houses seldom generates extraordinary profits over long periods. Excited and blinded by the huge claims, less wary investors failed to obtain proof the business model was realistic. Victims lost millions. How can you spot a scam such as a Ponzi scheme? Typical warning signs include: Promoters with questionable histories of securities breaches, promises of extraordinarily high returns with low risk, and warnings not to seek professional advice. Investors must look beyond the claims, and prove such profits are being made. The best way to do this is to obtain the company's financial statements, and discuss them with a qualified advisor. Be aware that every company prepares their own financial statements, and if you have any doubts regarding management credibility, the financials they prepare are also suspect. A credible company, particularly one raising large sums of money from investors, will have their financial statements verified (audited) by a qualified, independent accounting firm. Never invest in a company that cannot or will not supply these audited reports to you.
Why is financial information important? Business decisions must be based on good financial information. Before a bank loans money to a company, or a knowledgeable investor buys shares in a company, they verify the company's PROFIT and CASHFLOW is strong. They also want to know how much DEBT the company owes to others. The company’s Financial Statements provide this info. Most companies which need to raise money from outside parties (banks and/or investors) have their financial statements AUDITED (verified) by an independent accounting firm, who review the information and sign off that it is accurate. An audit is not always required, but it provides a level of assurance that the business is legitimate, and that the figures can be relied upon to make sound business decisions. What financial information does the IFFL provide about its investments? The IFFL provides NO financial statements or offering documents for the companies
they promote. They discourage any reference to financial
information. Members are simply told these companies pay
an enormously high rate of return. As proof, they
point to previous investors who have received these returns for several
years. (In reality the previous investors may be only receiving a
monthly statement, but no cash!) Ponzi scheme operators like
the IFFL deliberately divert attention away from proof (audited
financial statements), and instead point to existing investors and the
returns they are receiving. This is a recipe for disaster, because, although
they may not know it, existing investors are being paid purely to entice
new investors into the game. How does the IFFL operate? Commission salespeople with little or no background in finance ("Structurists") set up group meetings in hotels or other public places. Individuals may be invited by a friend or relative. Often the friend or relative receives a commission for bringing others to the meeting. In return for the $1,500 membership fee, structurists offer to teach you “how the rich invest”, how you can receive huge returns with low risk, and pay little if any taxes. To induce investment, they create a fictitious portfolio for each member, generally between $10,000 and $25,000. The monthly portfolio statements lure investors by showing the excellent returns being passed up by failing to invest. The IFFL and its slimy leaders have been indicted and are under court order in several provinces and states not to sell, promote or trade in securities of any kind. To get around this, they claim to operate as an “investment club” for their members, and never promote specific investment opportunities. But the truth is that the IFFL exists solely to promote investment in several shonky companies owned or controlled by the IFFL's leader, Milowe Brost. Structurists earn several hundred thousand dollars commission per year selling these selected investments to members. Related
Parties and Conflicts of Interest Irresponsible IFFL strategies recommended: Members are encouraged to borrow heavily against their homes, farms and other assets to maximize their IFFL investment. Unwary investors ignore the time-honored adage to diversify their holdings ("Don't put all your eggs in one basket"). The IFFL encourages this extremely risky tactic, even though they claim to provide sound investment training for their members. When the IFFL investments fail to pay, some investors’ lives will be financially ruined. If the IFFL were truly an institute for financial learning, they could not recommend such a risky strategy, particularly for seniors. Last update: November 2007 |