[music playing] JULIA LORENZ-OLSON: Cheaters, grifters, con artists, flim-flammers, hucksters, scammers, mountebanks-- there are as many financial frauds as there are names for the people who perpetrate them.

But here are five of the most popular methods of parting a victim from their money and how you can protect yourself.

[theme music] [music playing] PHILIP OLSON: In 1920, Charles Ponzi had an amazing investment opportunity for New Englanders, guaranteeing a 50% return in just 45 days on something having to do with mail-order coupons.

Incredible?

Try unbelievable.

There actually were no returns.

Ponzi was just using new investment dollars to pay back the previous investors.

Eventually, the scheme fell apart.

Ponzi ended up owing $7 million and spent 14 years in jail.

Ever since then, any time a money manager uses new investments to pay returns on previous investments, it's known as a Ponzi scheme.

The most famous example was perpetrated by Bernie Madoff, who ran a high-level Ponzi scheme for 20 years that bilked investors out of somewhere between $10 and $20 billion with a B.

Before accepting an investment opportunity, you should look up a broker's background and complaint history on FINRA's brokercheck.org.

And you can request written evidence that the investment professional is a sworn fiduciary.

A close cousin to the Ponzi scheme is the pyramid scheme.

Say someone offers you a no-fail way to make money just by joining their organization for a $100 fee.

Your job is then to find new recruits, who each pay you their $100 sign-up fee, 10% of which you give to the person who signed you up.

If you manage to sign up 10 people, you've just made $900 from your $100 investment.

And if each of those 10 people finds 10 people, you get another $900 for doing absolutely nothing and so on and so on.

Like a Ponzi scheme, there is no actual investment.

All returns come from finding new investors.

And when those run out, the whole thing collapses, leaving the people at the bottom of the pyramid with nothing.

This may sound a bit like a multi-level marketing company.

But in a landmark 1979 ruling, the Federal Trade Commission decided that Amway was not a pyramid scheme because distributors did actually have to sell products to make money.

If a business seems to stress recruitment over sales, that may be a red flag.

So before getting involved in an MLM, ask your contact for information on the success ratios of new members and how the company makes its profits.

PHILIP OLSON: Made infamous in movies like "Boiler Room" and "Wolf of Wall Street," the pump-and-dump scam is when an organization artificially inflates the value of a stock that they already own a lot of, usually by aggressive cold-calling, spam emails, and sometimes even fake news reports.

When enough suckers have bought in, the scammer sells all their shares at an inflated price, sending the price tumbling back down and wiping out most people's investments.

Getting rich quick on the stock market is incredibly rare.

If someone tells you they have a hot stock tip or they know what the next big thing is going to be, ask yourself why they would share this valuable information with you.

PHILIP OLSON: Imagine getting a phone call from the IRS informing you that you owe additional taxes that must be paid immediately or a warrant will go out for your arrest.

Maybe they even tell you that police are already en route to your house.

But it could be all cleared up with a quick wire transfer of $1,000.

Many people are so rattled by a phone call like this and so confused by tax laws that they'd rather go along with it than risk making the IRS angry.

But there are certain things the IRS will never do.

They will never contact you by phone or email first.

You'll always get a letter.

They will never demand payment in a specific form.

And they will never threaten to have local law enforcement arrest you for not complying.

If you get this phone call and are feeling uncertain, you should just call the IRS directly to check if the request is real.

JOYCE (ON PHONE): Hello, Mr. Olson.

This is Joyce from your state bank.

I'm calling because we suspect an unauthorized transaction on your account.

Oh, no.

JOYCE (ON PHONE): Before we continue, I just need some information to verify that I'm speaking to the real Philip Olson.

Sure.

My birthday is [bleep].

And my social security number is [bleep].. And my mother's maiden name is [bleep].. How's that?

Uhh-- [clears throat] I mean, yeah, that'll do.

[laughing] Hello?

Hello?

Sometimes, the easiest way for a scammer to get your personal info is to just call you up and ask for it.

They might already know some things about you, like your address or your bank, and just need you to fill in the blanks under the guise of confirming your identity.

PHILIP OLSON: The digital version of this is known as "phishing," where the scammer sends out emails disguised to look like they're from trusted sources.

These emails typically contain a link that brings the victim to an impostor website where they're asked to enter account details, like passwords or credit card numbers.

Whether it's a phone call or an email or a text message, you should never give your information to someone who contacts you.

It's always safer to contact the company yourself by calling their official phone number or navigating to their website directly.

Typically, if an individual or organization is on the level, they won't have any problem with you verifying their identity or looking into their track record.

They should welcome it.

And, of course, we'd all love to get rich overnight.

And scammers know it.

The best defense is remembering the old adage.

If something sounds too good to be true, it probably is.

And that's our two cents.

[theme music] Do you have first-hand experience with financial frauds?

Are there any others we didn't talk about that you think people should be aware of?

Sound off in the comments.