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Lessons from the Iraqi Dinar Scam

This week, one of my coworkers came into my office all excited and gave me an investment tip.  I’ve gotten used to receiving tips, because everyone knows I invest and I love to talk about investing.  Today’s tip was something unusual and unfamiliar to me, investing in the Iraqi Dinar.  According to my friend, I can buy Iraqi Dinar for pennies each and they will be worth a couple dollars each, as soon as the UN recognizes the Iraqi currency.

If it Sounds too Good to be True, it Probably Is

50 Iraqi Dinar
Image by Leonardo DaSilva

I admit I was intrigued by this opportunity to make some money and I jumped right into research mode.  The first thing that came up was a ton of Google hits for Iraqi Dinar Scam.  Luckily for me, there were a dozen red flags that warned me to avoid this scam.  My friend wasn’t so lucky, since he already invested in the Dinar and it could turn into a total loss.

Many of the people on the forums complaining about this scam had paid many times what the Dinar were worth and they weren’t aware that Dinar are only redeemable in Iraq.  If the Iraqi Dinar is ever accepted back into the global monetary system, they will likely be re-issued, making the existing notes worthless.

The Smell Test

There have always been fraud and scams, as long as there have been people to swindle.  Since the age of the Internet and email, it has become possible to scam thousands of people all around the world, from anywhere on the planet.  It’s more important than ever to check the fundamentals of any opportunity, before you invest your money.

Taking investment advice from a friend or associate can be a costly mistake, since they may be just one step above you in a scam or a Ponzi scheme.  Or, they may not understand the fundamental risk and value of an investment, causing them to overestimate what its worth.  Before you act on someone’s advice, always verify the investment’s fundamentals for yourself.

Den of Thieves

Wall Street has become a rigged casino, with investment banks and hedge funds looking out for themselves, instead of their customers.  Often, they are betting against their own customers and profiting from the bad positions they have recommend to them.  Insider trading is rampant and the SEC only catches a fraction of the people and companies engaging in fraud.

Even your friendly neighborhood investment advisor has to earn a living by recommending fee-laden products.  And, sometimes they have been known to skip town with their client’s assets.  Investment advisors can be a valuable resource, but you must verify they have your best interests in mind.

The Bottom Line

The bottom line is investing has become a minefield of shaky investments and conflicts of interest.  Don’t wander in without first looking where you are about to step.  After all, the first rule of investing is to not lose money.

“Beware of false knowledge; it is more dangerous than ignorance.”

George Bernard Shaw – Irish Playwright

Recommended Reading

Mint Blog – New Investment Scam: Buying the Iraqi Dinar
Bucksome Boomer – Secrets to Avoiding Work at Home Job Scams
Stumble Forward – Seniors are being Taken Advantage to buy Life Insurance

This post was featured on the Carnival of Personal Finance over at Make Money Online.  If you aren’t familiar with the Carnival of Personal Finance, you need to check it out. It’s the greatest carnival on the net.

This post was also featured on:

Invest it Wisely – Midweek-Reading: Tis the Season
Live Richly – Round Up 9: Holiday Edition

Thank you for the links to my blog.

32 comments to Lessons from the Iraqi Dinar Scam

  • Your last sentence, referring to not losing money, is one I totally agree with. Warren Buffett is often over quoted and worshipped in my view, but his saying (paraphrased) of “Rule#1: Don’t lose money; Rule#2: Don’t forget Rule#1 makes a lot of sense from a mathematical perspective. When you’re talking about total loss of principal, or near-total loss, it’s not worth the risk. If something seems too good to be true or as if it’s something for nothing, it’s probably in fact nothing worth putting hard earned money into. But, there’s that urge to make the quick buck that traps so many folks.
    Squirrelers recently posted..The Role of Money in our LifeMy Profile

    • You are right Wise Squirrel. Mathematically, you would need a 100% gain, just to make up for a 50% loss.

      Getting something for nothing seems to be the basis for every scam. That’s probably why it’s so effective.

  • Good move on your part for researching this “opportunity” before getting too excited. People are usually blinded by “easy money” propositions!
    BeatingTheIndex recently posted..Weekend Edition- Vacation Time &amp Christmas Shopping EditionMy Profile

    • Thanks Mich.

      Something my friend said triggered a red flag in my mind. He said, “Usually, the big guys get all of the great deals on stuff like this.” That got me thinking, if the hedge funds and investment banks weren’t buying up the Dinar, there must be a reason.

  • I had not heard about this scam. What is the saying about a sucker every minute?

    Thanks for including the post on work at home scams.
    Kay Lynn @ Bucksome Boomer recently posted..Inexpensive Holiday TraditionsMy Profile

    • You’re welcome Kay Lynn.

      I’m glad you posted about all of the work at home scams. With so many people out of work and desperate, they are the worst.

  • Interesting scam. If you could get them for cheap I might get one just for the novelty value.

    In today’s age of Google and the Internet, there is really no excuse to not do one’s own diligence. Sometimes people get scammed anyways, through no fault of their own, but many times it can be avoided, and easily so if one only does a bit of research. For instance, I should have researched Bloomex before trusting them with my flower delivery. :S
    Invest It Wisely recently posted..Don’t Get Suckered by the Banks- How Much Can You Really Afford to Spend on a New HomeMy Profile

    • Kevin,

      I hadn’t thought about the novelty value. If you pay more than a penny each, it’s too much. One person paid 9 cents and they were pretty upset. I’m not sure how much you would have to buy to have them shipped to you.

  • Curtidayne

    Fortunately, I don’t agree. I was also tipped about this Dinar investment and decided to exercise some diligence myself.
    First of all, yes there are quite a bit of publications advising against this investment. I would like to refer to most of these publications as propaganda, the rest I would not bother with because they are outdated by at least a couple of years. On that note, I would like to remind you that if anyone were to assume that our media and internet are not subject to censorship or disinformation by our government or the powers that be, then that person would be operating on a very naive thought process.
    Before China revalued their currency, they purchased print space in a few of our nations most respectable news publications stating that China had no intentions of revaluing their currency but, within the same week, it was revalued.
    Secondly, I have established contacts as far as Iraq and Dubai and all are confirming the same thing. The Dinar will revalue before the end of 2010. On December 21st(this year), Shabibi, head of the Central Bank of Iraq, stated that it was the goal of the Central bank of Iraq to revalue the Iraqi Dinar in an effort to give it purchasing power. This was his statement less than a week ago. Maliki, the prime mister of Iraq, backed this up on December 23rd by reiterating the very same intentions. With this kind of talk from the gentleman responsible for a revalue of the Iraqi currency, maybe it’s time to stop buying into all the negative propaganda. I am not saying to avoid it, just do your homework and differentiate fact from disinformation.
    I will tell you that my wife works at a local bank, who, by the way, offers to sell and buy the dinar regardless of the exchange rate. This means that you do not have to travel to Iraq to cash in on this investment. There was also a presidential order by none other than one of the architects of this deal, George W. Bush, stating that the american citizens have the same rights as Iraqi citizens to invest in the Iraqi Dinar.
    Third…just because Iraq operates on a floating exchange rate system, does not mean they aren’t aloud to revalue their currency. That power rests with the central bank as it has for years. Even our federal reserve could revalue our currency if they wanted to. In fact, they do all the time. When the Federal Reserve, otherwise known as the Central Bank of the United States, prints money, the market is flooded with more hard currency, inflation rises, and our dollar’s value fluctuates down. They are able to do this because they are a privately owned institution separate from our government and would require only limited legislation if any at all to operate.
    Another thing to consider is the fallacy that the pre-war value of the Dinar was set by Saddam and not a true reflection of the country’s worth. Kuwait has, currently, the highest valued currency in the world based almost primarily on their oil assets. It would take $3.70 USD to match just one of their Dinar. Iraq is the second largest holder of oil reserves in the world and has the ability and the means to produce it faster than even Kuwait. Sectarian violence has decreased dramatically. Our troops are pulling out. The new government is seated, and their trade and export/import embargos have been lifted. The 2011 Iraq budget will be law as of 1-1-2011.
    This budget is higher than their 2010 budget. Except now, they are receiving NO money from the IMF whereas their 2010 budget was covered, in part, by loans from the IMF. So how can Iraq operate on a higher budget, producing a higher deficit than last year, with out the financial backing? Simple, make their currency more valuable.
    Not to mention that in order for the Dinar to become an internationally recognized currency, and in light of the lifted sanction, it must be internationally recognized to take part in the Foreign Exchange, it would have to be revalued.
    Finally, the Paris group is an investment group to which Iraq is in debt for over 40 billion USD. They have offered to forgive the debt to a mere 9 billion USD if Iraq revalues their currency by the end of 2010.
    So, after all of my research and self-diligence, my wife and I decided to trade up for some dinar. Keep in mind that if this revaluation does not happen, I can go down to my wife’s work and exchange them back to USD. The loss would be only the difference between the buy and sell exchange rates, less than twenty percent. How often do you go to a casino and always walk out of there with at least 80% of what you walked in with?
    Is the Iraqi Dinar a gamble? Absolutely, but it is extremely low risk with, potentially, a high return. Just purchase through a certified currency broker.

    • Curtidayne,

      Thanks for the comprehensive comment.

      Some of the information you provided conflicts with my research, but most of my reasearch was Internet based. It sounds like you have put quite a bit of thought into this investment and I hope your gamble pays off.

      As for me, I will keep my money invested in stocks and mutual funds for now. As I said in my post, if hedge funds and investment banks are avoiding Iraqi Dinar, I will as well.

  • Hi Bret, thanks for the link! I heard about the Iraqi Dinar a few years ago but I decided to pass. There was too much “it’s a sure thing” and not enough detail. While some people may make money on it, usually these are the insiders. I am far from one of those, so I will stick with investments I understand.
    Jennifer Barry recently posted..Housing- To Buy Or Not To BuyMy Profile

    • Jennifer,

      You are right. The people making money on the Iraqi Dinar are the ones selling them to naive investors. One person was charged 9 cents each, while the market price was around a cent. That’s a pretty good markup.

  • Investing is taking risks so precautionary activities such as questioning are really needed. The questions you should ask to your chosen dealers should be very direct. Some specific questions may include, but should not be limited to:

    -Can I see a copy of your US Treasury registration?
    -Can I see your BBB rating?
    -How long have you been in business?
    -How does the company verify the authenticity of each dinar?
    -Do you give out certificates of authenticity?
    John’s Dinar Blog recently posted..Baghdad To Tackle Oil Issues- PM VowsMy Profile

    • John,

      Thanks for weighing in on this.

      I checked out your Dr. Dinar blog and it was interesting. Are you selling Dinar, investing in Dinar or just advocating the investment? It wasn’t clear from reading your blog.

  • Not selling dinar, just a community.

  • My boyfriend came home with this same scam months ago all gung ho about it after a phone call from his uncle. His uncle thinks that he’s pretty sage about investing but it didn’t pass MY smell test. When I pointed out just how much the money would have to appreciate just to break even, BF was surprised. Then I asked him how he planned on redeeming said cash since he couldn’t do it state side. That pretty much killed it for him. The sage uncle? Well, he listened to himself and now I’m sure is out a couple thousand bucks.

    Always people, if it sounds to good to be true…
    Sandy @ yesiamcheap recently posted..What Are My Goals for 2011My Profile

    • Sandy,

      I am so glad you didn’t lose any money investing in Dinar. The Smell Test is so important and yet so many people are taken in. I think they start thinking about all the money they are going to make and caution flies right out the window.

  • Jack

    I have been invested in Iraqi dinar. I don’t regret it. If you watch the Iraqi news, you will find out that many things have happened recently. This is not a scam. If you pay attention, you would know that chapter 7 sanctions have been lifted. The only purpose for this is international trading. a revalue must occur in order to use Iraqi dinar for international trading. also a government formed after 9 months with out a government. There for they will revalue their money, which means there will be a profit made. The question is when will it revalue and how much? (how much profit be made?)

    • Jack,

      I hate to say this to you, but your comment would be a lot more credible if you left a real email address. You may have some very valid points, but the anonymous nature of your comment doesn’t instill much confidence.

      I am curious about how much you have invested in Dinar and how much you hope to profit. How do you intend to redeem them and do you believe the current Dinar will be exchanged for a new Dinar?

      This type of information would be very helpful to everyone.

  • Susans Dinar Blog

    If you’re interested in investing in the Iraqi Dinar, here are some thoughts to consider and action items. First and foremost, be honest with yourself on how much money you can invest in the Iraqi Dinar.

    • Susan,

      Your comment seems to be linked to the same blog as John, which is the DrDinar Blog. Once again, I am curious if you are invested in Dinar and if so, how much do you intend to profit.

      This kind of information would be helpful.

  • Buying Iraqi Dinars Is Smart

    Worst case scenario, you sell your dinars back to the dealer…I don’t see how that’s a big risk. I think investing in Iraq is a smart move, and the payoff could be huge.
    Buying Iraqi Dinars Is Smart recently posted..5-000 Iraqi Dinar IQDMy Profile

    • My experience has been that dealers are much more interested in selling something at a profit then in buying it back at a loss.

      If the current Dinar becomes worthless, there’s no way a dealer is going to buy it back. The buyer is going to eat the total loss.

  • I see your point, but I mean, isn’t the dinar kinda of ‘worthless’ right now? Buying in low volume can’t be that horrible of a decision if it’s money you can afford to lose.

    • The whole point of my post is that people are being led to believe investing in Dinar is a “can’t lose” investment. A lot of them are novice investors who aren’t investing risk capital.

      In my opinion Iraqi Dinar is a “likely to lose” investment. I would much rather see people put their money in an ETF or mutual fund.

  • rick

    this is all very interesting. i am like a weight scale tipping back and forth on this subject. i am certainly always interested in a good investment and a risk is a part of the game. my problem is i cannot find enough intelligent information on the dinar as an investment. looking for sites etc that do not sell the currency. just some good education that can help me make up my mind. any advice ?

    kimbrellr@sbcglobal.net

    thanks

    • Rick,

      My advice is pretty simple:

      If professional money managers, such as hedge funds and investment banks, are avoiding Dinar, you should too.

      If there was any opportunity to make money in Dinar, professional traders would be all over it and you would competing with them to buy some.

      If there was any potential future value in the Dinar, it wouldn’t be trading for less than a penny.

  • mark@dinar

    More advice on Iraqi Dinar here:

    http://www.dinardilemma.co.uk/

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