7.5.1 Case study: Prime bank investments

Greg discussing with a retired policeman

Greg, a retired policeman, sat in his favourite coffee shop thinking about ways to make his retirement more comfortable. He began to chat with a well-dressed gentleman seated at the next table. As they spoke, the man revealed that he was once a bank manager, but quit after he found another way to make money.

He told Greg about an investment called prime bank instruments and how it works:

Greg was a little suspicious because he'd never heard of this type of investment before. He liked the idea of investing with a bank, though. He decided on a cautious approach.

Then, the "former banker" asked Greg if he would like to make some "big" money. The retired officer took out a $100,000 mortgage on his paid-off home and gave the full amount with the expectation of making a double-digit return on his investment.

Three months later, he'd yet to see a penny of his money back. Greg had been a victim of a prime bank instrument fraud, a scam that has been around since the 1980s.

Lessons Greg learned:

For more information see Your risk for fraud quiz.

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