Yesterday, FINRA issued a new investor alert entitled High-Yield CDs: Red Flags That Signal A Scam. The alert warns investors to be careful when looking at promotions lauding certificates of deposit that guarantee interest rates that are substantially higher than current averages.
Pitches could come in various guises, but one particular case involved potential email fraud. The pitch seemed to come from a large American bank that was purportedly promoting a CD offered by an international banking partner. The pitch offered a CD with a 15% yield and contained instructions on how to wire funds at a time when most CDs at American banks and credit unions were offering barely over 1% for a comparable term. FINRA further warns that fraudsters are trying to take advantage of historically low yields on traditional bank products and investor desire for high yields by enticing them with fraudulent CDs that guarantee safety and double-digit returns.
FINRA’s new investor alert provides several warning signs that indicate a CD is potentially fraudulent, including:
- interest rates that are significantly higher than average;
- emails with addresses that are not originated and sent by the financial institution that is cited in the promotion;
- emails that contain misspellings or grammatical errors;
- promotions that claim to be from U.S. financial institutions that have aligned with international banks;
- promotions that claim to be for a “limited time only”; and
- promotions that claim to be directed at “best customers” and that require extremely high minimum investments (for example, $100,000).
The alert further urges investors who believe they have been a victim of a CD scam to contact their financial institution immediately to report a loss or theft of funds through an electronic funds transfer.
If you or someone you know has lost money as a result of an investment, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies.