Consumer Protection

The Two Most Common “Business” Scams Targeting South American and Other Investors

By July 21, 2021 No Comments


It is sad to see how many South American, small business owners, with the hope of investing their hard-earned capital in the U.S., get scammed. South Americans look to the U.S. as a safe, rich, and reliable capitalistic society. In turn, sometimes, they find themselves the target of bogus, straight-up scam deals where they end up with nothing, and the scammer, with their capital. In this article we describe the two most typical “business” scams we’ve encountered:

The Real Estate/Foreclosure Scam:

The deal goes as follows. The scammer usually an immigrant, long-time US resident, shakes his connections in his home country seeking capital. Once he finds the victim, he promises him investments in real estate. More specifically, the deal provides that upon the investor giving the scammer some capital (usually between 50k to 200k) scammer will find amazing deals in foreclosure auctions. Once the property is purchased, the scammer will take care of repairing, remodeling, and the investor will make a 30 to 40% return on his investment when the property is sold.

The reality is, first, that 30 to 40% return businesses don’t exist. Second, foreclosure deals are not that sweet as many people think. A lot of people are betting on foreclosure assets, and one does not necessarily buy it at margins good enough for large profits. Third. The scammer usually does not have the complex infrastructure (and a reliable GC) required to undertake remodeling projects. Fourth. The scammer may put the property (through deceit) in an entity of his control, leaving the investor at the mercy of the scammer who then, will say: oh, we need more money for the remodeling; we are out of budget. If an investor does not provide more money, the scammer then takes over the asset, an investor ends up with, not only no profits but the loss of his capital. It gets worse, but this fairly summarizes the common real estate scheme we’ve seen.

The Trucking Scam:

This one goes as follows. The scammer promises the investor that if he provides capital (same amount, 50k to 200k) to buy large trucks, then the scammer will take care of putting those trucks to work and have the investor receive a 30% return regularly. Again, rarely does a normal, legitimate business provides 30% on investment, but even if so, the scammer never means to run a truck operation. The scammer does not have the contacts or logistics to undertake the management of the trucks. Moreover, a scammer, like in our real estate example, will make sure he has title control of the truck, which he will then use to blackmail investors. A scammer usually buys useless trucks in need of large repairs that are not operable. If an investor does not provide additional capital for the repairs, the scammer simply sells and collects more from the sale of the trucks which end up abandoned.

Don’t fall victim to these scams. But if you do, contact attorney Eduardo A. Maura at eduardo@ayalalawpa.com to see how we can help you recover your capital.

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