How to Avoid "Investment" Scams
You won't know that the business is a scam until you are scammed, so the best way to avoid it is to look for RED FLAGS. Here are a few of them:
1. You have never met the other party in person. All your negotiations are thru messenger or zoom.
2. You do not know her real name, or her real address. You have never seen her office.
3. There are no written contracts. All your agreements are in your messenger or are texts in your phone. All her promises are mere POSTS ON HER FACEBOOK WALL.
4. She promises a very big return on investment, i.e. 100% in two mnths, or any incredulous figure. Remember that whatever she pays you has to come from somewhere. If she promises you a lot of money, ask yourself: where will she get it from?
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IF YOU REALLY WANT TO INVEST, here are the things you need to do:
FIRST:
Ask for registration documents, like SEC registration, DTI registration, Mayor's Permit, and BIR registration. Then go to these offices and ACTUALLY VERIFY if they are authentic.
Also, if the business claims to be a corporation, ask for its latest GIS (or secure them online from the SEC website). The GIS contains the names of the corporation's stockholders and directors, as well as other relevant data like capitalization.
Also, ask for her latest Audited Financial Statement (AFS), or secure it from the SEC. If she has been in business for at least a year and does not have an AFS, that is a RED FLAG. Her business is not a serious undertaking. Do not invest.
SECOND:
Verify the business owner's identity. Ask for her driver's license, her passport, or her PRC ID. Other government IDs can be easily falsified. Make a photocopy of these IDs and keep them. Check if the name in the ID is the same as the name in the documents mentioned in No. 1. If the owner refuses to show you her ID, it is a RED FLAG. Do not invest.
THIRD:
Ask for an actual meeting with the owner. Do not settle for a representative. Businesses that need investments are START-UPS and are therefore SMALL. The owner should therefore have time to meet with potential investors. If the owner refuses to meet with you in person, it is a RED FLAG. Do not invest.
FOURTH:
Bring a recorder to the meeting and record it in its entirety. TO VALIDLY RECORD THE MEETING, this is what you should do: Place the recorder on top of the table where the other party can see it, and say: "I am recording this meeting. Is that okay with you?" If she says YES, proceed. If she says NO, turn off your recorder and walk away. Do not invest.
FIFTH:
Bring the recording and the AFS to a friend who is an accountant. Ask the accountant if, in his opinion, based on the AFS, the promise is doable.
SIXTH:
Have the business owner draw up an Investment Contract. The Investment Contract must CLEARLY indicate EVERYTHING that she promised you. The promise must be in DETAIL, i.e., how much you are putting in, how much interest she will give, when you will be paid, etc.. The contract cannot look like the posts on her Facebook wall.
When the draft is ready, get a copy and bring it to your lawyer for review. Execute it only when your lawyer says that it is okay.
SEVENTH:
Sign the Investment Contract in the office of the owner. Bring a friend who can sign the contract as your witness.
EIGHTH:
Pay your investment at the owner's office and ask for an ACKNOWLEDGMENT RECEIPT right there. Do not leave without it. If they cannot give you an Acknowledgment Receipt, leave and say you will return to pay when the receipt is ready.
The Acknowledgment Receipt must clearly indicate that your payment was an INVESTMENT and must indicate when it will be returned and how much interest you will get.
Never pay through bank - whether online or over-the-counter, or through any mode of money remittance. If you do not want to carry cash around, ask your bank to issue you a MANAGER'S CHECK. The manager's check must be made out in the name of company that you are investing in.
NOTE: IF YOU CANNOT DO ANY OF THE THINGS MENTIONED ABOVE for any reason (ex., she is in Manila and you are in Cebu), do not invest. Better safe than sorry.
IF YOU THINK THAT THESE RULES ARE STRICT, it is because they ought to be. If you want your money back, you have to make sure that the other party knows that you can RUN after him if needed. If your arrangement is so loose that you cannot enforce it at will, you are probably not getting your money back.