Xingtong Liu had never invested in anything but had been thinking about doing so for a while when she thought she spotted a good opportunity.
What sparked Liu's interest was the Capital Financial Group located near the naval base where she was attending school. The owner, Vernon Matthews, solicited U.S. military personnel and their dependents to invest with his group by promising generous returns.
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"I guess I was kind of greedy by being told that I would be granted with high interest returns like 7.27 percent, so I decided to put some extra money into their account," Liu explained.
She gave Matthews more than $10,000 to invest, a year's worth of her savings. She quickly suspected trouble. When she asked for statements, all she got were excuses.
"His son got sick and his house needs to be repaired because of a hurricane," Liu said. "I lost my trust in him and his company."
She wanted her money back. She left voicemails, but no one returned her calls. So Liu called the Better Business Bureau and posted her complaints on the website Ripoff Report. She quickly learned she was not alone.
"I felt, 'Oh, maybe I am right. I should trust myself. This was a scam,'" Liu recalled.
Postal inspectors said Matthews took more than $235,000 from 34 investors and used it for his own benefit.
"In reality, what it was, was Mr. Matthews was broke. And every time he needed to pay his bills he would contact her and say, 'I have this great investment opportunity for you and solicit more money from her,'" explained U.S. Postal Inspector Marydith Newman.
Inspectors said Matthews didn't have a job. He lived off the money he stole from investors.
"He paid his rent, he paid his car payment, he bought groceries, he bought jewelry. He spent every penny that he took in on his personal lifestyle," Newman added.
Matthews pleaded guilty to mail fraud and was sentenced to four years in prison. He also has been ordered to pay more than $200,000 in restitution.
In the meantime, inspectors warn investors to do their homework before making any investments.
"Most people need to be registered and even if they're unregistered, you can contact your state corporation commission and look online to find out if people are actually licensed to be an investment broker or dealer," Newman explained.
The U.S. Securities & Exchange Commission offers the following advice on what you can do to avoid investment fraud:
Ask questions. Fraudsters are counting on you not to investigate before you invest. Fend them off by doing your own digging. It's not enough to ask for more information or for references -- fraudsters have no incentive to set you straight. Take the time to do your own independent research. For more about information see Ask Questions.
Research before you invest. Unsolicited emails, message board postings, and company news releases should never be used as the sole basis for your investment decisions. Understand a company's business and its products or services before investing. Look for the company's financial statements on the SEC's EDGAR filing system. You can also check out many investments by searching EDGAR.
Know the salesperson. Spend some time checking out the person touting the investment before you invest -- even if you already know the person socially. Always find out whether the securities salespeople who contact you are licensed to sell securities in your state and whether they or their firms have had run-ins with regulators or other investors. You can check out the disciplinary history of brokers and advisers for free using the SEC's and FINRA's online databases. Your state securities regulator may have additional information.
Be wary of unsolicited offers. Be especially careful if you receive an unsolicited pitch to invest in a company, or see it praised online, but can't find current financial information about it from independent sources. It could be a "pump and dump" scheme. Be wary if someone recommends foreign or "off-shore" investments. If something goes wrong, it's harder to find out what happened and to locate money sent abroad.
Protect yourself online. Online and social marketing sites offer a wealth of opportunity for fraudsters. For tips on how to protect yourself online see Protect Your Social Media Accounts.
Know what to look for. Make yourself knowledgeable about different types of fraud and red flags that may signal investment fraud.