How Do They Try to Con Us?

Not every businessman is honest, and not everyone is working from good intentions.

Sometimes, chasing the upside, we skip right past the red flags that are practically screaming we’ve walked into a scam. For better or worse, I haven’t managed to dodge a few of those stories on my own path. I tried to systematize what I learned — from some very painful and very “expensive” lessons — into a checklist.

Red flags worth watching for when you’re trying to spot a potential fraudster:

— The price is too good.
— The counterparty offers deal terms that are unusual for the established way business is done — especially when it’s clear they understand the obscure nuances well but won’t spell those details out.
— The counterparty won’t disclose their other clients, the ones you could ask for references.
— The counterparty hides behind “powerful” patrons, officials, and so on.
— The look of the counterparty’s documents is designed to manufacture an air of solidity with no real need for it: letterheads with flourishes, papers dressed up to resemble securities.
— The people closing the deal have no formal connection to the organization.
— The counterparty’s company name mimics the name of a large, well-known company.
— The company has no assets, no contracts, tiny turnover, no employees, an address that doesn’t add up, and the like.
— The counterparty recently changed its founder, director, or line of business.
— The counterparty has tax debts or questionable enforcement proceedings against it.
— As an extra guarantee, the counterparty offers you letters vouching for their own trustworthiness (such letters carry no real force).
— The counterparty refuses any intermediary like a bank or a notary (escrow, deposit boxes, letters of credit, and so on).
— The counterparty stirs up your fear of missing out through a limited offer and the need to close as fast as possible — including by staging a sense that third parties are fighting over the same deal.
— The counterparty paints enormous prospects of cooperation, if only this one deal gets signed.
— The counterparty demands irrevocable payment instruments (promissory notes, say) or signed acceptance certificates before fulfilling its own obligations.
— The counterparty isn’t looking for objective ways to protect both sides’ interests, nudging you toward a deal on their terms.
— The counterparty pushes to sign a large-sum deal right away, offering all sorts of arguments against testing the waters on smaller amounts first.
— The counterparty behaves so as to create the illusion that they suspect you of being the fraudster, pushing you and your ego toward a strategy of proving your own honesty. In parallel, they slip terms unfavorable to you into the deal under the guise of protecting their own interests.
— You realize that if the counterparty fails to deliver, your only way to defend your interests will be to call in law enforcement.
— The counterparty has a nominee founder or director.
— The profit on the deal is out of proportion with the risk of losing the entire sum you’ll pay them.
— The people negotiating on the counterparty’s side are unpleasant to you. Intuition is often our everything!

If you’ve run into some of the red flags on this list and you figure your case is special, your situation unique — know this: it isn’t.

As takeaways:

— If a deal looks too attractive, always ask yourself: “Why me? Why am I the one being offered this, and not relatives, competitors, the leading players in the market, and so on? Where’s the catch?”

— Don’t be shy about asking for more information!

— Find out what business track record your counterparties have, what reputation, how respected they are among seasoned businesspeople.

— Steer clear of deals with people who are desperate for money and ready to take unjustified risks for a quick payout.

— Steer clear of doing business with anyone who has no assets (or reputation) to answer with if things fall apart.

— And if you think the sum is too small, by your standards, to be worth conning you over — no. People are ready to con you over any amount of money. Everyone has a different idea of what counts as a large or a small sum.

Here’s to safe deals, everyone! 😎