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At first the person spent a long time developing a relationship. Then one day he started to talk about the company he works for. He had a mix up on supplies and due to this error, the company lost revenues by 30%. He mentioned there is no insurance to cover this error on his part. He has to some how make up the difference else he will be fired.

The difference amounts to $20K, and he has managed to recover most of it. There is still around $5K deficit. Of course, I have no intentions on sending any money. But how I can prove; to this person; that I know he's trying to scam me for money.

Claiming that he lives in Florida and is a US Citizen; but I'm thinking he is living somewhere in China. Although he claims he's in Dublin, working as a corp engineer on a project. So, what laws can I use against him?

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    Probably (with a strong indication toward certainty) there is no law you can use against this person. Tell him it's against EU law for the worker to be financially responsible for the company mix up (not entirely true). – SZCZERZO KŁY Jan 8 at 9:03
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    Why do you feel the urge to prove to this person that you know he is trying to scam you? That is, what extra pleasure do you derive by providing this person with proof that you know he it trying to scam you instead of just telling him without any proof that you know he is trying to scam you and then just breaking off all further communication with him? – Dilip Sarwate Jan 8 at 14:45
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    Even if this is not a scam you should consider if it makes sense to invest in a company with an owner who does business mistakes like that. – Philipp Jan 8 at 14:50
  • What would be the reason to give this person any money even if it wasn't a scam? Would you really consider giving $5K (or any amount) to someone you've never met? – TTT Jan 8 at 16:16
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    Personal experience with phone scammers ("microsoft tech support" etc) is that if you string them along for a while, then tell them you've just been messing about with them to waste their time, they get very annoyed (tirades of profanity down the line while I laugh at them). Presumably their business model relies on savvy folks hanging up on them quickly so they can move onto finding an actual sucker. Tell your contact you've known they're a scam since the first contact and were just playing them for your own amusement, then block them. – timday Jan 9 at 13:05
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But how I can prove; to this person; that I know he's trying to scam me for money.

Any reason you want to prove something to scammer? Any proof you throw at him, he will be able to come up with some other story / excuse. This may end up in you believing him more. There is obviously no advantage.

Best is to stop communication with the scammer. This will be the proof that you know about the scam. He/She will get the message and move on.

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You don't need to prove that the other party will scam you. You can't, because they didn't scam you yet.

But you don't have to prove anything. If you don't feel comfortable making business with someone, you can just say no. You are under no obligation to justify your decision to them. If someone wants to do business with you, then they need to prove to you that they are trustworthy.

What you are asked to do here is to invest money into a failing business in order to rescue it. What due dilligence should one make before even considering such a deal?

  • Does the company actually exist? Check the company register of the jurisdiction where they claim to be. Verify this independently, not through your contact.
  • If the company exists on paper, does it exist physically? Is there an actual office where they claim to be situated or is it just a mail box? Verify independently, not through your contact.
  • If the company exists physically, does it actually do business? Do they have any customers or suppliers? Do they exist? Verify this independently, not through your contact.
  • Does your contact actually work at the company? You can do that by trying to reach your contact using the information from the company registration. If you call the company and they haven't heard of the guy (or they have a guy by that name but that guy doesn't know who you are), then your contact is an imposter.

If you find out that your contact deceived you about any of these points, then that's a red flag.

But even if you did check all these things and they all check out, then you still need to answer an even more difficult question: Is it actually a worthwhile investment? It might be an actual company full of hard-working people with an owner who has nothing but the best intentions, but that doesn't guarantee that the company has any future. There is no point in investing into a company which will go bankrupt anyway, with or without your capital. If you invest money into a company and that company goes bankrupt, your money is gone.

How can you find out if a company is a worthwhile investment? Well, there are very smart people with decades of experience in the investment banking business and they too judge poorly from time to time. But part of their decision process are things like this:

  • How do their books look? Do they have a stable customer base which provides a reliable stream of revenue? Did they make profits in the past years? And are those books checked by a reuptable independent auditing firm which confirmed that they tell the truth?
  • Do they have a business plan for the next years? Does that business plan have any chance to succeed? In order to judge this you need a lot of expertise in the market they operate on.
  • Do the people who manage the company know what they are doing?
  • How do they pay you back? Is it a loan they pay back with interest? Do you buy equity in the company and get a cut of their future profits? How does that return of investment compare to other investment options?

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