CD Scams

Apr 2018


It seems a few times every year I talk to someone who’s been scammed by purchasing bogus CDs. I recently met a man who lost $50,000 in one of these scams. What is so frustrating to me is that the scams are so similar and year after year people continue to fall for them. As the man explained to me, he got an email from an internet bank that looked very official and professional. The email said that they are an internet bank and because they have no brick and mortar locations their cost of doing business is lower and thus, they can pass the savings on to their customers by offering above-market returns on CDs. The CD rate quoted was 7 percent. The email also said that this is an exclusive offer and that it cannot be passed on to family and friends. The gentleman completed the online application and then sent in his money. He did receive a certificate and that’s the last he ever heard. He now realizes he was scammed and his money is gone. In addition, he now has identity theft issues as the on-line application he completed asked for sensitive information including his social security number.

Because people continue to fall for this scam, I want to remind you of things that you need to do to protect yourself when it comes to investing. The first thing is that unless you have dealt with a financial institution in the past do not directly link to a site from an email. If you think the offer you received is legitimate, type in the web address in your browser. When you directly link to a fraudulent site, the crooks can do all sorts of things to your computer including accessing sensitive information.

There is no doubt that internet banking has gained traction over the last number of years. It is also true that in many situations you can get better rates of return by using an online bank. That being said, no legitimate organization can offer rates that are 10 times higher or more than the going rate. As investors and consumers we have to be reasonable. It sort of reminds me about 20 years ago when investors would invest in anything that had dot com after its name. It didn’t matter what the company did, as long as it had dot com in its name investors rushed in. Unfortunately, many of those investors lost everything. As investors, we must be sensible.

The reason why so many investors are being taken advantage of when it comes to CDs is simply because they are desperate to get higher returns than are being offered by traditional financial institutions. As far as I’m concerned, when you deal in the financial world you can never afford to let your guard down. When something sounds too good to be true I can assure you in the great majority of cases it is. In all too many cases people get taken advantage of because they let greed dictate their investment decisions. As I’ve always said, greed and fear are the two emotions that investors need to guard against. In the situation with these fake CDs, too many investors are letting greed rather than logic, dictate their investment decisions.

With technology the way it is, investors have to be more cautious than ever before. If you get a solicitation for an investment whether it is a CD, mutual fund or other, before you send any money or give them any information, you need to do your homework. My advice has always been to only rely on independent information and if you cannot get independent information, walk away. I can honestly say that some of the best investments that I’ve ever made are the ones I walked away from.

Good luck!


If you would like Rick to respond to your questions, please email Rick at