Seniors Top Targets Of Investment Scams

WASHINGTON -- A reformed con man said on Wednesday that senior citizens increasingly are being bilked in investment scams and they need to be careful.

Barry Minkow, who did 7½ years in prison for defrauding investors in his ZZZZ Best carpet-cleaning company in the 1980s, told senators that concerns about weak stock market returns make this a great environment for fraud.

Minkow warned that many investment scams targeting senior cities involved "Ponzi" or pyramid schemes, where new investor money is used to make payments to earlier investors to give the false illusion that the investment is successful.

The SEC said the ploy is used to trick new investors to invest in the scheme and to lull existing investors into believing their investments are safe and secure. In reality, the fraudster almost always steals investor money for personal use.

"People will stop at nothing ... to defraud," Minkow said. His advice for seniors: "Don't invest out of fear or greed."

People 60 and older make up 15 percent of the country's population but account for an estimated 30 percent of fraud victims.

With baby boomers about to retire, regulators expect an increase in financial scammers preying on seniors.

The Securities and Exchange Commission has put together a new national strategy for protecting older investors. Click here to find out more.