Financial Instruments > This
- How Prime Bank Frauds Work
bank programs often claim investors' funds will be used to purchase and
trade "prime bank" financial instruments on clandestine overseas
markets in order to generate huge returns in which the investor will share.
However, neither these instruments, nor the markets on which they allegedly
trade, exist. To give the scheme an air of legitimacy, the promoters distribute
documents that appear complex, sophisticated and official. The sellers
frequently tell potential investors that they have special access to programs
that otherwise would be reserved for top financiers on Wall Street, or
in London, Geneva or other world financial centers. Investors are also
told that profits of 100% or more are possible with little risk.
and entities are targeted, including municipalities, charitable associations
and other nonprofit organizations. The promoters of these schemes have
demonstrated remarkable audacity, advertising in national newspapers,
such as USA Today and the Wall Street Journal. Some promoters of these
schemes avoid using the term "Prime Bank note," and tell prospective
investors that their programs do not involve prime bank instruments in
an effort to demonstrate that their programs are not fraudulent. Regardless
of the terminology, the basic pitch - that the program involves trading
in international financial instruments - remains the same, and investors
should continue to be vigilant against such fraud.
of Banking-Related Investment Fraud
are warning signs of prime bank or other fraudulent bank-related investment
These fraudulent investment pitches typically offer or guarantee spectacular
returns of 20 to 200 percent monthly, absolutely risk free. Promises of
unrealistic returns at no risk are hallmarks of prime bank fraud.
Despite having credible-sounding names, the supposed "financial instruments"
at the heart of any prime bank scheme simply do not exist. Exercise caution
if you've been asked to invest in a debt obligation of the top 100 world
banks, Medium Term Bank Notes or Debentures, Standby Letters of Credit,
Bank Guarantees, an offshore trading program, a roll program, bank-issued
debentures, a high yield investment program, or some variation on these
descriptions. Promoters frequently claim that the offered financial instrument
is issued, traded, guaranteed, or endorsed by the World Bank, International
Monetary Fund (IMF), Federal Reserve, Department of Treasury, International
Chamber of Commerce (ICC), or an international central bank.
Promoters claim that transactions must be kept strictly confidential by
all parties, making client references unavailable. They may characterize
the transactions as the best-kept secret in the banking industry, and
assert that, if asked, bank and regulatory officials would deny knowledge
of such instruments. Investors may be asked to sign nondisclosure agreements.
Promoters frequently claim that investment opportunities of this type
are by invitation only, available to only a handful of special customers,
and historically reserved for the wealthy elite.
of Inordinate Complexity
Investment pitches frequently are vague about who is involved in the transaction
or where the money is going. Promoters may try to explain away this lack
of specificity by stating that the financial instruments are too technical
or complex for non-experts to understand.
You should be especially watchful for prime-bank related schemes promoted
over the Internet. Despite numerous SEC actions charging prime bank promoters
with multiple violations of the federal securities laws, prime bank offerings
continue to proliferate in cyberspace.
you have any information regarding the offer or sale of "prime bank"
or similar financial instruments, or programs employing these instruments,
please provide that information to the SEC's
Division of Enforcement immediately by using the Enforcement Complaint
Information obtained from the following
Recommended further reading:
Informed Investor - "Prime Bank" Scams
of FBI on "Letter of Credit" and "Prime Bank Note"
Scheme Advisory Alert by the Federal Reserve Bank of New York
alert on "Prime Bank Instrument" scams
secret market fraud - Price Waterhousecoopers
- So-Called "Limited Edition" United States Treasury Securities
on Financial Instruments
note that this is not a solicitation or an offer to provide these entities.
note that you should consult with your financial and legal advisors
before using the information on this web site. We provide the information
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