Amid $390M Ponzi scheme; financial experts urge investors be cautious

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Amid $390M Ponzi scheme; financial experts urge investors be cautious. (WWMT/Jason Heeres)

A financial expert at Western Michigan University reminds people to be careful when investing in the wake of a $390 million Ponzi scheme that ensnared investors.

Federal investigators said a firm called Jumar Management LLC, co-owned and managed by Kalamazoo native Robert "Bo" Parfet, was defrauded in a $390 million Ponzi scheme. Court records show Jumar investors lost millions.

A source said there are at least 50 people in the Kalamazoo area who invested their money with Jumar in what turned out to be a scheme.

Onur Arugaslan, director of the Personal Financial Planning Program at Western Michigan University, advises investors to ask basic questions from the start.

"What are the fees? How liquid is this investment? If i need my money urgently? Will I be able to sell quickly? What are the risks associated with this investment?" Arugaslan said.

No matter what type of investments you make, Arugaslan said investment firms need to produce documents.

"As an investor, if you are given your hard earned money to people than you need to keep them accountable and provide all the documents about what's happening to your funds," Arugaslan said.

According to the FBI, investment fraud schemes are characterized by offers of low- or no-risk investments, guaranteed returns, overly-consistent returns, complex strategies, or unregistered securities. Examples of investment fraud include advance fee fraud, Ponzi schemes, pyramid schemes, and market manipulation fraud.

Parfet's firm faces allegations in a separate civil case in Colorado for selling unregistered securities.

Jim Kopecky, Parfet's attorney, said his firm was a victim of the Ponzi scheme and its investors were caught up in a complex fraud ensnaring a number of sophisticated investors.

The FBI said the masterminds of the schemes often seek to victimize affinity groups - such as groups with a common religion or ethnicity - to utilize the common interests to build trust to effectively operate the investment fraud against them.

The FBI said don't judge a person or company by their website; flashy websites can be set up quickly.

Arugaslan recommends investors work with a financial advisor or financial planner.

"You want to treat every client like their family and how would you feel if your family was defrauded. It's one reason you make sure every investment you talk with a client about is appropriate for them and a quality investment," John Fiore, a Portage-based financial planner with Edward Jones, said.

Fiore said investors need to understand the risks involved with investing.

"If you have concerns or questions or reservations about it make sure you are doing additional research. Make sure you're asking the right questions, don't feel rushed into it," Fiore said.

Tools available to research background of investment firms

The Securities and Exchange Commission (SEC) has compiled a list of information on different types of financial frauds.

Securities fraud or wrongdoing can be reported to the SEC on its website.

The SEC has also complied a list of tools for investors to research their investment professional or firm.

The FBI offers tips for avoiding investment fraud on their website.

  • Don’t judge a person or company by their website; flashy websites can be set up quickly.
  • Don’t invest in anything you are not absolutely sure about. Do your homework on the investment and the company to ensure that they are legitimate.
  • Check out other websites regarding this person/company.
  • Be cautious when responding to special investment offers, especially through unsolicited e-mail.
  • Be cautious when dealing with individuals/companies from outside your own country.
  • Inquire about all the terms and conditions.