By: Jack WaymirecloseAuthor: Jack Waymire Name: Jack Waymire
Email: jack@paladinregistry.com
Site: http://paladinregistry.com
About: Jack writes for the InvestorWatchdog website and Worth magazine. He worked in the financial services industry from 1976 to 2004. For twenty of those years he was the president of a Registered Investment Advisory firm and a Broker/Dealer. Jack is the author of Who's Watching Your Money? The 17 Paladin Principles for Selecting a Financial Advisor and is a co-founder of PaladinRegistry.com.See Authors Posts (87) | August 21, 2009 | Illegal Schemes & Scams

Colin Nathanson, an Orange County, California resident was sentenced to 27 years in federal prison for swindling 2,500 investors out of $28,000,000 and perhaps as much as $55,000,000.

He told investors their assets would be deposited in an Investment Trust he controlled and the money would be used to purchase an equity interest in a private Internet-based technology company. He also told investors the company was about to go public or be acquired by a bigger company – the big pay-off. 

In fact Nathanson used the money to support two failing golf businesses and pay for a lavish life style and gambling losses.

Why did this scam work? The fake Investment Trust enabled Nathanson to gain personal control of investor assets. Once he had the assets he could use them anyway he wanted. Also, he promised a big pay-off for little or no risk. This is the greed factor that so many investors respond to.

How could investors have avoided the scam? Never turn physical possession of assets over to the person or companies controlled by the person making the investments – unless the company is a major brand name firm. This would have saved Madoff and Nathanson victims. Also, do not buy any sales pitch that includes high returns for little or no risk. This free lunch does not exist.