Diamond investing scam targets Nova Scotia

by Natalie MacLellan on November 3, 2010

in Fraud Prevention

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Nova Scotians are being targeted with an investing scheme offering diamonds as an alternative to stock market investing.

While we don’t know of anyone who has invested, the Nova Scotia Securities Commission has been contacted by individuals who were pitched the scheme, and thought it sounded fishy enough to report. A similar scam has been reported in various other Canadian provinces.

While details are still sketchy, the scam works something like this:

  1. 1. You are approached with a great investing solution, much safer than the stock market. Investing in diamonds is positioned as a great alternative, as diamonds are “always” valuable.
  2. 2. You are shown an appraisal for a diamond, and are sold the diamond at a discounted rate to the appraisal value. The appraisal is a certificate with a picture of the diamond and the appraised value.
  3. 3. The company supplies both the appraisals and diamonds, and gives you a certificate from an appraiser.  You do not take possession of the diamond.
  4. 4. You are told that you can sell the diamond back to the company later on.

Even if this is a legitimate offer, this is not the way we would suggest anyone buy a diamond (or any other commodity). You ought to be able to see the diamond for yourself, and have an independent appraiser look at it. Also, if the gem is not in your possession, you are unable to shop it around at a later date, to ensure you are getting the best price if and when you decide to sell.

Because this diamond is sold as an investment contract, it is a security. A seller would have to be registered with the Nova Scotia Securities Commission, or qualify for an exemption under the Nova Scotia Securities Act. If you have been approached with this or a similar investment scheme, contact the Nova Scotia Securities Commission at 424-7768 or by email.

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