Beware of scammers looking for upfront deposits.
Almost every entrepreneur will face different points in their careers when they need capital for various reasons. And sometimes to hopefully get the money faster and more efficiently they will turn to advisory companies (like my own) to help get the job done.
Here is the tricky part. Advisors come in all shapes and sizes with different ethical standards. And sometimes their clients feel like they are in desperate situations, and will give large non-refundable deposits to unscrupulous brokers to retain them.
Simply put, it is an awful idea to give any broker a retainer that does not go into an escrow account or have some performance guarantees behind it.
I can understand that sometimes brokers want a commitment from a client to lock them in. If this is the case, the money should be escrowed in a third-party account.
Over the past sixty days, we have direct experiences with two situations (one for equity and one for debt) where business owners paid large deposits to brokers, where led on for months to believe that everything in the process was moving along, only to find out months later that there was a scam and nothing was happening. These brokers have websites and no negative reviews on the web.
And now, two honest business owners have wasted deposit money and perhaps more importantly, months of their time derailed by a fraudulent scheme that was never getting off the ground anyway.
Typically, the brokers disappear to their next victim, and the entrepreneur doesn’t have the resources to fight to get their deposit money back.
To combat this, I am considering launching a web site like ripoffreport.com, where these scams can be discussed and pointed out publicly. Do you think such an initiative would be a good idea to help the entrepreneurial community? Anyone want to volunteer some time or resources to make this happen?
The fraudsters need to be stopped.