One of the easiest ways to identify a bond scam is to look for a website that has a valid CUSIP number of the security you’re interested in. A legitimate CUSIP number identifies the issuer of a security. However, just because the CUSIP number is legitimate does not mean it’s a genuine company. While this information is public, it does not prove ownership of the security.
Many of these fraudulent companies pose as legitimate firms, but they’re not. A few warning signs to watch out for include bogus firms that demand upfront payments or offer to pay them back in case the transaction doesn’t go through. A fake firm will use a reputable firm’s address and name, but will give you their own contact details. The company may even pretend to be a company based overseas.
Another sign of a bond scam is a high-yield investment trading program. These schemes typically claim to be backed by the Federal Reserve Bank or the US Treasury. Beware of any company that claims to be backed by the World Bank or the United Nations. These fraudulent companies also sometimes claim that they are part of a war effort, but are not. It’s a good idea to contact a reputable issuer before making a purchase.