Since I teach monthly classes on computer safety and protecting your privacy online at the SIBL branch of The NYPL, I was asked to attend a one day conference the SEC was putting on about preventing affinity/community fraud.
The Securities and Exchange Commission has 11 regional offices, from which it enforces federal SEC laws, regulates industries and electronic markets, and protects investors from fraud and unsafe business practices. This conference mostly focused on the latter.
Marc P. Berger, Regional Director of the SEC New York Office made the introductory remarks.
The Securities and Exchange Commission has 11 regional offices, from which it enforces federal SEC laws, regulates industries and electronic markets, and protects investors from fraud and unsafe business practices. This conference mostly focused on the latter.
Marc P. Berger, Regional Director of the SEC New York Office made the introductory remarks.
Affinity - or community based - fraud is just what it sounds like: defrauding groups who have something in common. These could be an ethnic group, religious group, veterans, elderly, law enforcement or active military, really any group can be targeted. The fraudster sometimes pretends to be a member of the group, but it is far more effective if they actually are, in fact, one of them. It is easy to gain people's trust when you are “one of them”. Find the common bond and you can go far.
This benefits the fraudster in several ways: not only do people trust them more, but no one wants to talk about getting fooled, especially by someone in their community. It adds a layer of embarrassment, which makes it all the more insidious. This is one reason people need to hear these stories: the tales act as a warning but also remove some of the stigma by showing people they are not alone.
To that effect, the first panel was made up of 5 people who were all the victims of affinity scams.
This benefits the fraudster in several ways: not only do people trust them more, but no one wants to talk about getting fooled, especially by someone in their community. It adds a layer of embarrassment, which makes it all the more insidious. This is one reason people need to hear these stories: the tales act as a warning but also remove some of the stigma by showing people they are not alone.
To that effect, the first panel was made up of 5 people who were all the victims of affinity scams.
Panel I: Investors Speak: Personal PERSPECTIVES on Financial Fraud.
There were four panelists: Steve, Vivian, Anita, and Blanca, with moderator Lisa Fairfax, a professor at George Washington University Law School.
Anita and her husband (who was also in the audience) are very religious and met through their church. A few years ago a man (I'll refer to him as X as we were not given his name) came to Anita's church to speak about using your talents wisely. His message resonated with them as he tied it into the Book of Talents, and everyone assumed X was a devout Christian who had been vetted by the church, and so could be trusted.
At the end of his lecture he asked who had their 401Ks or 403Bs with Vanguard, and most people raised their hands. "Do you know that one of the companies in that 401k finances Rick’s Cabaret?" he asked. Rick's Cabaret is a chain of strip clubs, and the folks in the church were not keen on their money being involved. No proof was offered that this was the case, though RCI Hospitality Holdings is publicly traded company so it is possible. Many of them decided to pull their money out early and stop making contributions, and instead invest with X and his company.
Anita was one. She took his card but didn't speak to him yet because she wanted to discuss it with her husband who was absent that day. X was based out of New York but flew back to Texas to meet them, which they found impressive. He'd also been on TV a few times (including on Donny Deutsch's show) talking about how he was a self made success, and there were several recognizable financial experts backing him up as legitimate. X didn't just seem credible, he actually was credible. She and her husband decided to invest. At first the company was very good about getting back to her when she called or texted. The returns on her investment were deposited into her bank account like clockwork in the beginning and things seemed wonderful.
At the end of his lecture he asked who had their 401Ks or 403Bs with Vanguard, and most people raised their hands. "Do you know that one of the companies in that 401k finances Rick’s Cabaret?" he asked. Rick's Cabaret is a chain of strip clubs, and the folks in the church were not keen on their money being involved. No proof was offered that this was the case, though RCI Hospitality Holdings is publicly traded company so it is possible. Many of them decided to pull their money out early and stop making contributions, and instead invest with X and his company.
Anita was one. She took his card but didn't speak to him yet because she wanted to discuss it with her husband who was absent that day. X was based out of New York but flew back to Texas to meet them, which they found impressive. He'd also been on TV a few times (including on Donny Deutsch's show) talking about how he was a self made success, and there were several recognizable financial experts backing him up as legitimate. X didn't just seem credible, he actually was credible. She and her husband decided to invest. At first the company was very good about getting back to her when she called or texted. The returns on her investment were deposited into her bank account like clockwork in the beginning and things seemed wonderful.
X didn't just seem credible, he actually was credible. They decided to invest.
Then the payments slowed and were often late. They would call and get apologies and a deposit would happen soon after. Then things got later and later and it became more difficult to reach anyone at the company. It was almost impossible to reach X though at first he was very attentive with texts and calls.
Then one day a man who had been a partner with X called them to tell them he had quit, and warning them that there was trouble ahead. Two months later they stopped getting deposits. "Once you are clued in it takes time to get out and you end up losing more" she warned. "Do your research and make sure their offices are real and not a PO box." Everything about the scam seemed legitimate: the promissory notes looked real, all the documents looked seemed authentic. She and the others in her congregation who were duped thought that they were being socially conscious investors who were supporting things like smoothie shop that hires students. They felt like they were investing in businesses that helped communities, so it was win win win, you make money, support good stuff, investor gets their fees. The custodian was supposed to take care of the investors, but he was actually partnered with X who originally came to the church pushing the scheme. It turned out he was going to churches across the country getting people to pull out of their legitimate investments and turn their money over to him.
"We never told anyone someone stole 1.4 million dollars from us because I don’t define myself as a victim" she said, tearing up. "We never let it steal our joy. I’ve gone on TV to raise awareness so it doesn’t happen to other people who may not be so strong."
Then one day a man who had been a partner with X called them to tell them he had quit, and warning them that there was trouble ahead. Two months later they stopped getting deposits. "Once you are clued in it takes time to get out and you end up losing more" she warned. "Do your research and make sure their offices are real and not a PO box." Everything about the scam seemed legitimate: the promissory notes looked real, all the documents looked seemed authentic. She and the others in her congregation who were duped thought that they were being socially conscious investors who were supporting things like smoothie shop that hires students. They felt like they were investing in businesses that helped communities, so it was win win win, you make money, support good stuff, investor gets their fees. The custodian was supposed to take care of the investors, but he was actually partnered with X who originally came to the church pushing the scheme. It turned out he was going to churches across the country getting people to pull out of their legitimate investments and turn their money over to him.
"We never told anyone someone stole 1.4 million dollars from us because I don’t define myself as a victim" she said, tearing up. "We never let it steal our joy. I’ve gone on TV to raise awareness so it doesn’t happen to other people who may not be so strong."
The next speaker was Vivian who had had a successful electrolysis business until laser hair removal came along and her business went under. She was seated between a man and his wife on a plane (kind of a strange seating arrangement, probably a red flag there), and ended up chatting about her business and the need to do something new. It turned out he was in investing and offered to help her out. She felt comfortable because it was just a nice, chatty couple on vacation, and everything was very friendly. While she was not religious herself, the fact that the man was Orthodox made her feel like she could trust him. "I was looking for something, and it all seemed very warm, inviting and great."
She ended up going to his office which was opulent. Clearly this man was very successful, and the glossy brochures she got about an REIT with fees that were coming down looked so legitimate that even her accountant said it looked good. He told her it was up to her and she decided to invest after doing some more research. She called two officers in the town the property was in to double and triple check that the property and building actually existed. The bait was real, and she bit.
She got letters saying the company was doing really well, though the market was plummeting (this was around 2008). Deposits kept coming in, so she assumed things were fine. Soon her calls weren’t being returned though. She came into the actual office and no one was there that she knew, it was all new staff. 2 days later accountant called and said the SEC closed the company down.
There were red flags, but she only noticed or found out about them when it was too late. The company kept talking about diversification but it turned out they were investing in random things like diamond mines. They only had 2 accountants handling around 1400 people's investments. The infrastructure wasn't there.
She ended up going to his office which was opulent. Clearly this man was very successful, and the glossy brochures she got about an REIT with fees that were coming down looked so legitimate that even her accountant said it looked good. He told her it was up to her and she decided to invest after doing some more research. She called two officers in the town the property was in to double and triple check that the property and building actually existed. The bait was real, and she bit.
She got letters saying the company was doing really well, though the market was plummeting (this was around 2008). Deposits kept coming in, so she assumed things were fine. Soon her calls weren’t being returned though. She came into the actual office and no one was there that she knew, it was all new staff. 2 days later accountant called and said the SEC closed the company down.
There were red flags, but she only noticed or found out about them when it was too late. The company kept talking about diversification but it turned out they were investing in random things like diamond mines. They only had 2 accountants handling around 1400 people's investments. The infrastructure wasn't there.
There were red flags. She only noticed or found out about them when it was too late.
"By the time they stop returning your calls it’s too late" she said. "These things start out as actually good investments and pay out for a while. Then it all disappears." She recommended getting a registered FINRA investor and doing a FOIA request on the company to see if the they have had any bankruptcies, or if the people in charge have felonies. It turns out the guy who roped her in had changed his name at one point, and 2 of the others at the companies had felonies. "Hire a PI to check up on the people."
She ended up interviewing a lot of the investors. "People just assume that things are being endorsed when they hear them being talked about on TV and radio which isn’t true. I had credentials all over the internet, websites, etc for my business, but my business failed." She said that the fine print was extremely important to pay attention to as she'd once lost $10,000 because she hadn't noticed something in the fine print. She also recommended investor’s insurance and making sure your broker is registered. After all her work she said that she "kicked butt and got… maybe 10% back." Her two thieves went to jail for a couple years, but most likely had a ton of money waiting for them in secret accounts when they got out.
She was at a major event recently where bad information was given. This came from a reputable source and it goes to show you really have to double check everything. Don’t assume you are insured or that a major company is safe, make sure you have done your due diligence. Pay attention to the market because there are red flags, like the Real Estate market collapsing in 2008, but she ignored it because they kept telling her everything was fine. "Make sure you get the Owners Title when you invest in real estate" she said. It’s the proof you need."
She ended up interviewing a lot of the investors. "People just assume that things are being endorsed when they hear them being talked about on TV and radio which isn’t true. I had credentials all over the internet, websites, etc for my business, but my business failed." She said that the fine print was extremely important to pay attention to as she'd once lost $10,000 because she hadn't noticed something in the fine print. She also recommended investor’s insurance and making sure your broker is registered. After all her work she said that she "kicked butt and got… maybe 10% back." Her two thieves went to jail for a couple years, but most likely had a ton of money waiting for them in secret accounts when they got out.
She was at a major event recently where bad information was given. This came from a reputable source and it goes to show you really have to double check everything. Don’t assume you are insured or that a major company is safe, make sure you have done your due diligence. Pay attention to the market because there are red flags, like the Real Estate market collapsing in 2008, but she ignored it because they kept telling her everything was fine. "Make sure you get the Owners Title when you invest in real estate" she said. It’s the proof you need."
Steve is a retired police officer. Law enforcement is targeted by affinity scams quite a lot as it turns out. He spoke with man on the phone several times, but turned him down until the guy mentioned this would be an IPO investment. "It's pre-IPO so when it goes public you’ll get rich!" That made him perk up because he had heard that was often a successful thing to invest in and always wanted to be a part of an IPO. The man spoke gently to him and explained things well, so it was very believable and Steve felt safe.
The man (I'll call him Y) told him that shares went out for $1 each and left it open how much he should put into the company. Y assured him that it might take years to build this company up, so not to expect a big payoff right away. Steve did some checking after 2 years, but didn’t go to Mayville, NY to see the office. When he finally did, he discovered that they only had a tiny office with one desk and a woman answering the phone. When someone called the office they would get a call back within 24 hours so it seemed better than some investment companies that took a week or two to get back to you. Y and the secretary kept telling him to check the website for information, but the website was a good fake and fooled him. Scams that are investing in places far from the mark make it easier to get away with things because it's harder and takes more money to check out that something local.
Every time he put an investment in he would get a certificate of investment. At one point they changed the name of the company and asked for all the certificates back. He sent them and got a certificate for the new name with all of his shares on it, and kept getting new ones whenever he put more money in. When things started looking fishy, he started looking at the certificates more closely and three of them had the same certificate number on them. He took them to financial adviser and they said it was fraud. He went to the company that issued the certificates themselves and was assured things were ok. It turned out the certificate maker was just some guy who worked for the company defrauding him.
The man (I'll call him Y) told him that shares went out for $1 each and left it open how much he should put into the company. Y assured him that it might take years to build this company up, so not to expect a big payoff right away. Steve did some checking after 2 years, but didn’t go to Mayville, NY to see the office. When he finally did, he discovered that they only had a tiny office with one desk and a woman answering the phone. When someone called the office they would get a call back within 24 hours so it seemed better than some investment companies that took a week or two to get back to you. Y and the secretary kept telling him to check the website for information, but the website was a good fake and fooled him. Scams that are investing in places far from the mark make it easier to get away with things because it's harder and takes more money to check out that something local.
Every time he put an investment in he would get a certificate of investment. At one point they changed the name of the company and asked for all the certificates back. He sent them and got a certificate for the new name with all of his shares on it, and kept getting new ones whenever he put more money in. When things started looking fishy, he started looking at the certificates more closely and three of them had the same certificate number on them. He took them to financial adviser and they said it was fraud. He went to the company that issued the certificates themselves and was assured things were ok. It turned out the certificate maker was just some guy who worked for the company defrauding him.
Check the company AND the broker. Make sure they are actually connected.
Being ex-police, Steve asked Y a lot of questions. He wanted to know how many market makers are working for Y's company. Y said there were four definite and they were working on two more. Steve asked who they were and Y rattled off the names very fast, but Steve managed to get 2 of them written down. A couple weeks later he called the one in California, but they said we are not a market maker for Y, and had never heard of them.
"If you invest check the company AND the broker" he said. "Make sure they are actually connected. Go to their office and make sure they exist and it’s not just a secretary in a rented room." He recommended ignoring cold callers, and checking the investment with other companies to make sure they also know about it. "Ask who the people they are signing contracts with are, but then check with those companies and make sure it’s true!"
The FBI has been involved in his case. So far one man plead guilty on one count, one for two counts and Y plead guilty to 4 counts. Since everyone has plead guilty, there will be no trial so sentencing will happen in January. He probably won’t get anything back from any of this. Like so many fraudsters, they knew they would get caught so they tried to get as much money from people as possible first. They'll go to jail for a few year and have millions waiting for them when they get out.
"If you invest check the company AND the broker" he said. "Make sure they are actually connected. Go to their office and make sure they exist and it’s not just a secretary in a rented room." He recommended ignoring cold callers, and checking the investment with other companies to make sure they also know about it. "Ask who the people they are signing contracts with are, but then check with those companies and make sure it’s true!"
The FBI has been involved in his case. So far one man plead guilty on one count, one for two counts and Y plead guilty to 4 counts. Since everyone has plead guilty, there will be no trial so sentencing will happen in January. He probably won’t get anything back from any of this. Like so many fraudsters, they knew they would get caught so they tried to get as much money from people as possible first. They'll go to jail for a few year and have millions waiting for them when they get out.
Blanca was in her 20's when she was scammed. She had inherited a good amount of money, but didn't know anything about what to do with it. She met a man who was also from Ecuador. He spoke Spanish and they chatted about their home country a lot which made her feel more comfortable. He took her to restaurants, showed her a good time, and she thought they were friends. The man showed her statements and returned calls within 24 hours whenever she reached out, so she trusted that all was well.
After a while she stopped getting callbacks and started seeing weird transactions. It was 2008 and she knew what was happening with the markets, so she got worried and told them to stop all investing. They said they couldn’t and had to continue until things were done. She looked into her accounts and found that a lot of money was gone and reached out for help. She was lucky though: the broker ended up losing his license, was fired and the company refunded her money.
After a while she stopped getting callbacks and started seeing weird transactions. It was 2008 and she knew what was happening with the markets, so she got worried and told them to stop all investing. They said they couldn’t and had to continue until things were done. She looked into her accounts and found that a lot of money was gone and reached out for help. She was lucky though: the broker ended up losing his license, was fired and the company refunded her money.
He was from my country and that made me trust him more.
Now she doesn’t trust anyone, not even her own financial adviser. She always goes to the meetings for her investments and does a lot of research herself. She said you need to ask for their licenses and look into their records and their past. "He was from my country and that made me trust him more." she said angrily. "It was more a friends conversation than an investing conversation. Keep friends and investors separate. You feel weird grilling your friends."
Vivian agreed: never mix friends and investing. Or even hiring them for anything; keep a definite line between the two areas of your life. “I need to be able to sue you” she said.
None of the panelists checked the SEC website about any of these people or companies prior to investing. The hard truth is that sometimes you just can’t get anything back, and when you do it usually takes a very long time. Check with FINRA and SEC before you invest because preventing this stuff is literally what they do and they offer tools to protect you.
Vivian agreed: never mix friends and investing. Or even hiring them for anything; keep a definite line between the two areas of your life. “I need to be able to sue you” she said.
None of the panelists checked the SEC website about any of these people or companies prior to investing. The hard truth is that sometimes you just can’t get anything back, and when you do it usually takes a very long time. Check with FINRA and SEC before you invest because preventing this stuff is literally what they do and they offer tools to protect you.
Keynote Speaker: Jay Clayton
Jay Clayton, Chairman of the SEC was the first Keynote speaker. While his job covers a lot of territory, affinity and retail fraud are a focus for him. One of the greatest tools the SEC has for keeping people safe is what they learn from speaking with victims. It informs the priorities of the whole commission and guides some budgetary needs.
One thing they heard again and again from people was "I wish I had gone to the SEC website!" so they started putting the address on everything. They also linked to it on a form that has to be presented to people before they make an investment.
One group that they see a lot of are teachers. They tend to trust what they are told (by adults anyway) and the SEC is trying to focus on building more protections for teachers. They often don’t understand the fees they pay, and there are specific teacher accounts which tend to have higher fees, so things seem almost normal to them when there are strange fees attached to investments.
Active Military are also very susceptible. They tend to trust other military personnel and veterans (their training drills this often life-saving trust into them) which makes them particularly vulnerable to affinity fraud. Additionally, if they are deployed it is very difficult to stay on top of things and do thorough research on who is doing what with their investments.
So how should we stay safe and keep others from falling for scams? Investor.gov provides an easy way to check investor’s background. If you can’t find anything about them or if they have had repeated disciplinary problems that is a major red flag. Know who you are dealing with and do your homework before trusting them at all. "I have great skepticism of self-guided IRA’s" he said. "They don’t have the protections others do."
One thing they heard again and again from people was "I wish I had gone to the SEC website!" so they started putting the address on everything. They also linked to it on a form that has to be presented to people before they make an investment.
One group that they see a lot of are teachers. They tend to trust what they are told (by adults anyway) and the SEC is trying to focus on building more protections for teachers. They often don’t understand the fees they pay, and there are specific teacher accounts which tend to have higher fees, so things seem almost normal to them when there are strange fees attached to investments.
Active Military are also very susceptible. They tend to trust other military personnel and veterans (their training drills this often life-saving trust into them) which makes them particularly vulnerable to affinity fraud. Additionally, if they are deployed it is very difficult to stay on top of things and do thorough research on who is doing what with their investments.
So how should we stay safe and keep others from falling for scams? Investor.gov provides an easy way to check investor’s background. If you can’t find anything about them or if they have had repeated disciplinary problems that is a major red flag. Know who you are dealing with and do your homework before trusting them at all. "I have great skepticism of self-guided IRA’s" he said. "They don’t have the protections others do."
Know who you are dealing with and do your homework!
What do you do if you have been targeted? Call the SEC for one. There is a tips, complaints and referrals department, with a handy website that allows you to alert them to possible scams as well. They received over 20,000 last year and looked into each within 72 hours.
During the Q&A a woman brought up Madoff and the fact that Harry Marcopolos made several reports of his wrongdoings over the years and nothing came of them until it was too late. "Those problems live in our DNA now" Clayton said. "Everyone uses 2008 as a motivator as far as this should never happen again. We are more rigorous and treat investigations more thoroughly. We continue to adjust our rules and approaches to try to keep up with new scammers and scams."
As for investment advice, Clayton recommended getting started early, but getting educated first. We live in a credit based economy: we go into debt for school, cars, houses, etc. Everyone needs to transition to where they are making 18% over-all on their finances. Get debt under control first, get educated, then make sure your investments are diversified.
Cryptocurrencies and Blockchain have great promise to eliminate costs in the financial system. However, any time there is something new it attracts unsavory types. The Initial Coin Offerings market attracted a HUGE number of investors and the SEC has done a lot to weed out the fraud while trying to help get this new opportunity stabilized.
During the Q&A a woman brought up Madoff and the fact that Harry Marcopolos made several reports of his wrongdoings over the years and nothing came of them until it was too late. "Those problems live in our DNA now" Clayton said. "Everyone uses 2008 as a motivator as far as this should never happen again. We are more rigorous and treat investigations more thoroughly. We continue to adjust our rules and approaches to try to keep up with new scammers and scams."
As for investment advice, Clayton recommended getting started early, but getting educated first. We live in a credit based economy: we go into debt for school, cars, houses, etc. Everyone needs to transition to where they are making 18% over-all on their finances. Get debt under control first, get educated, then make sure your investments are diversified.
Cryptocurrencies and Blockchain have great promise to eliminate costs in the financial system. However, any time there is something new it attracts unsavory types. The Initial Coin Offerings market attracted a HUGE number of investors and the SEC has done a lot to weed out the fraud while trying to help get this new opportunity stabilized.
Lessons Learned: Avoiding Fraud
After a short break was another panel, moderated by Paul Radvany, a professor at Fordham University School of Law. The panelists were all people who's job it is to educate investors.
Radvany reiterated the oft repeated advice to look up your investment professional on the SEC website and added that if someone has been with a ton of different firms that’s a red flag. If you think that you may be getting defrauded you should call someone. It doesn't matter who you call first, just make the call!
Gerri Walsh is Senior Vice President of Investor Education at FINRA.
The Financial Industry Regulatory Authority (FINRA) has an ongoing investor protection campaign focusing on outreach to enable people to better understand financial safety. There’s a lot of victim blaming and that needs to change. They blame themselves enough!
Scams do not have to be an investment scam to fall under investment related fraud: people end up liquidating investments to put money into the scam. FINRA is studying fraud from all sides, trying to figure out what separates the people who engage with fraudsters but don’t end up investing or reporting it, those who do report it, and those who do end up investing.
53% of those surveyed had engaged with a scammer. About a quarter ended up losing money. A lot of younger people lose money through online scams, especially ones advertised or involved in social media. Usually you are online when you are alone and social isolation makes you an easy target. There's no one there to say "wait a sec, that looks fishy!" A lot of scams, especially online scams, use time pressure and FOMO (Fear Of Losing Out) to hook people. There might be a ticking clock, limited time/slots offer, or images of others having a great time after getting involved.
Radvany reiterated the oft repeated advice to look up your investment professional on the SEC website and added that if someone has been with a ton of different firms that’s a red flag. If you think that you may be getting defrauded you should call someone. It doesn't matter who you call first, just make the call!
Gerri Walsh is Senior Vice President of Investor Education at FINRA.
The Financial Industry Regulatory Authority (FINRA) has an ongoing investor protection campaign focusing on outreach to enable people to better understand financial safety. There’s a lot of victim blaming and that needs to change. They blame themselves enough!
Scams do not have to be an investment scam to fall under investment related fraud: people end up liquidating investments to put money into the scam. FINRA is studying fraud from all sides, trying to figure out what separates the people who engage with fraudsters but don’t end up investing or reporting it, those who do report it, and those who do end up investing.
53% of those surveyed had engaged with a scammer. About a quarter ended up losing money. A lot of younger people lose money through online scams, especially ones advertised or involved in social media. Usually you are online when you are alone and social isolation makes you an easy target. There's no one there to say "wait a sec, that looks fishy!" A lot of scams, especially online scams, use time pressure and FOMO (Fear Of Losing Out) to hook people. There might be a ticking clock, limited time/slots offer, or images of others having a great time after getting involved.
Before investing: Stop, Talk and Listen!
Financial literacy is a good weapon against most scams. She outlined the traits of those who hadn't fallen for scams: they’d heard about different scams and scammers so they knew what to look out for. It's important to talk about them, educate people to keep them safe. When you are approached or see an add for what seems like a great investment you should stop, talk and listen. Give yourself space between the pitch and investing so you have time to think it over and talk to others about it. If you talk to people and they tell you this is a scam, listen to them! About a quarter of people just won't listen and invest anyway. If you know someone like this, keep at it, keep talking, and maybe you can break through their denial.
When people fall for scams they don't just lose money, they lose sleep, health and piece of mind.
When people fall for scams they don't just lose money, they lose sleep, health and piece of mind.
Next up was Lori Schock, Director of the Office of Investor Education and Advocacy at the SEC. She was also quick to promote Investor.gov. "Can't stress it enough!" She said that one barrier to people reporting fraud is not knowing exactly who to report it to, so they are working to solve that and get the site in front of as many people as possible.
"When you get pulled over the first thing they ask is "license and Registration" she said "Do the same when investing!" If someone isn’t licensed, do not do business with them. If the product isn’t registered that’s a huge red flag too. If they tell you the investment is guaranteed return, that’s nonsense because there’s no such thing as a guarantee when you are investing. There is always a chance an investment loses money. Always! You can check any product using FINRA's EDGAR database to make sure they are registered. Only promissory notes are not listed.
People these days research everything: where to eat, where to go on vacation, etc. All too often they don't research their investments with the same rigor, even though the stakes are higher. You might lose more than just money: you could lose your faith in yourself and your fellow human beings.
"When you get pulled over the first thing they ask is "license and Registration" she said "Do the same when investing!" If someone isn’t licensed, do not do business with them. If the product isn’t registered that’s a huge red flag too. If they tell you the investment is guaranteed return, that’s nonsense because there’s no such thing as a guarantee when you are investing. There is always a chance an investment loses money. Always! You can check any product using FINRA's EDGAR database to make sure they are registered. Only promissory notes are not listed.
People these days research everything: where to eat, where to go on vacation, etc. All too often they don't research their investments with the same rigor, even though the stakes are higher. You might lose more than just money: you could lose your faith in yourself and your fellow human beings.
When you get pulled over the first thing they ask is "license and Registration. Do the same when investing!
She recommended people sign up for the email list, you only get 3 or 4 a month and they are full of useful information. There are a lot of ways to follow FINRA on social media as well. For those New York she recommended developing relationships with the actual SEC people, who are happy to talk to investors. The people who's job it is to protect investors would "rather hear about a potential fraud from 100 people than not hear about it at all."
Does an investment need to be registered? They use the HOWEY test to determine this. 2/3 of investment fraud victims are men, because they often don’t think they need to verify things if their gut tells them it feels right. It’s easy to make them feel comfortable and that sways these gut decisions. Most are between 55-65 and have some level of financial literacy.
This year the SEC passed the Regulation Best Interest rule package (Reg BI) setting a best standard of conduct for brokers and dealers. It also mandated a Customer Relationship Summary (Form CRS) which is a short disclosure form (2 pages) that hopes to get more info and clarity to people. Broker dealers and investment advisers have until June 30, 2020, to comply.
Lorie was so adamant that people feel comfortable reaching out that she gave out the number to her office. "You will get a call back within 24 hours!" she promised. You can also report suspected securities fraud or wrongdoing on the SEC's Tips, Complaints or Referrals page.
Does an investment need to be registered? They use the HOWEY test to determine this. 2/3 of investment fraud victims are men, because they often don’t think they need to verify things if their gut tells them it feels right. It’s easy to make them feel comfortable and that sways these gut decisions. Most are between 55-65 and have some level of financial literacy.
This year the SEC passed the Regulation Best Interest rule package (Reg BI) setting a best standard of conduct for brokers and dealers. It also mandated a Customer Relationship Summary (Form CRS) which is a short disclosure form (2 pages) that hopes to get more info and clarity to people. Broker dealers and investment advisers have until June 30, 2020, to comply.
Lorie was so adamant that people feel comfortable reaching out that she gave out the number to her office. "You will get a call back within 24 hours!" she promised. You can also report suspected securities fraud or wrongdoing on the SEC's Tips, Complaints or Referrals page.
After her was Tracey McNeil, Ombudsmen from the SEC. Her job is to help retail investors with questions, complaints or issues with the SEC itself, or the organizations they work with such as the stock exchanges and FINRA. The yellow box with lighthouse on the SEC site brings you to her department. They have a small staff, but they will try to answer everyone's questions about regulations and take people’s suggestions.
Christopher Gerold, President of the North American Securities Administrators Association (NASAA) and chief of the New Jersey Bureau of Securities spoke next. The NJ Bureau of Securities is kind of a state level SEC, with jurisdiction over anyone giving investment advice. The NASAA takes thousands of complaints and brings thousands of actions against fraudsters.
He spoke about the Metals.com case which targeted older, mostly conservative individuals. They would call and talk about elections, president, social and political viewpoints. A lot of the people targeted lived in conservative Southern states, and the scam artists would parrot GOP talking points. People would instantly feel kinship, and feel comfortable investing. The callers would even send photos of their families which gave their targets more affinity for these "family men", but they were just stock photos.
The scam got people to leave safe investments in their 401ks and IRA’s, and invest in precious metals. While the metals existed and would be purchased at the agreed upon price, they charged up to 30% commissions which is usury. This was not exactly fraud, but was definitely financial exploitation which is now illegal as well.
They were alerted to the scam when a financial professional called in to report that one of their customers called and asked to liquidate 100k to invest. It seemed fishy, and it turned out to be a scam. As a financial professional, if you get such a call it is your duty to report it.
He also spoke of the difference between Broker Dealers and Investment Advisers. One actually sells while the other advises. Dealers have to be registered, but advisers may not unless they do a certain level of business. They should all should appear on investor.gov if they are state or federally registered.
He spoke about the Metals.com case which targeted older, mostly conservative individuals. They would call and talk about elections, president, social and political viewpoints. A lot of the people targeted lived in conservative Southern states, and the scam artists would parrot GOP talking points. People would instantly feel kinship, and feel comfortable investing. The callers would even send photos of their families which gave their targets more affinity for these "family men", but they were just stock photos.
The scam got people to leave safe investments in their 401ks and IRA’s, and invest in precious metals. While the metals existed and would be purchased at the agreed upon price, they charged up to 30% commissions which is usury. This was not exactly fraud, but was definitely financial exploitation which is now illegal as well.
They were alerted to the scam when a financial professional called in to report that one of their customers called and asked to liquidate 100k to invest. It seemed fishy, and it turned out to be a scam. As a financial professional, if you get such a call it is your duty to report it.
He also spoke of the difference between Broker Dealers and Investment Advisers. One actually sells while the other advises. Dealers have to be registered, but advisers may not unless they do a certain level of business. They should all should appear on investor.gov if they are state or federally registered.
They played a video with testimony from some people who had been scammed. "I didn’t want anyone to try to talk me out of it so I didn’t tell anyone before I invested" said one woman. Even though the location on Google maps didn’t match the location the scammers told her, she still wanted to believe in the opportunity.
One common method of finding people to scam is to call and ask for a random person. Then if the mark tells the person their name they say "your name is in their file too" and the person somehow believes them. Usually these are scare-scams, where the scammer pretends to be an officer, FBI agent or from the IRS or some other government organization. They tell the person they are not allowed to hang up, put them on hold or tell anyone what is happening. The target is scared and complies, isolating themselves.
The next step should raise many, many red flags: the "officer" tells the target that they have to put a large amount of money on a gift card in order to pay off the debt. The IRS does not accept Amazon gift cards, but feeling scared and isolated, the target doesn't think about it. One woman was even asked by the store clerk if this was for someone on the phone because there were scams going on, but she was so freaked out that she said no, it was for her friend and purchased the card. Make sure to listen to people who are trying to warn you, and make sure you listen to your own feelings that something seems off!
Another kind of scam that is pretty common in the internet age is the romance scam. People meet online, but have never met in person. Things seem to move very quickly, with the scammers saying "I love you" in just a few conversations. Eventually they tell a sob story about being stuck in customs because they owe money and ask for help.
Long before I was a librarian I worked in the international department of UPS Customer Service. We got a lot of calls about romance scams, mostly involving the target thinking they were helping their boy/girlfriend ship things home to their family, when really they were helping to ship stolen goods. One woman insisted they were actually married, even though they had never met in person. "We got married online!" She wouldn't accept that that wasn't something that existed. Lonely people make easy targets.
One common method of finding people to scam is to call and ask for a random person. Then if the mark tells the person their name they say "your name is in their file too" and the person somehow believes them. Usually these are scare-scams, where the scammer pretends to be an officer, FBI agent or from the IRS or some other government organization. They tell the person they are not allowed to hang up, put them on hold or tell anyone what is happening. The target is scared and complies, isolating themselves.
The next step should raise many, many red flags: the "officer" tells the target that they have to put a large amount of money on a gift card in order to pay off the debt. The IRS does not accept Amazon gift cards, but feeling scared and isolated, the target doesn't think about it. One woman was even asked by the store clerk if this was for someone on the phone because there were scams going on, but she was so freaked out that she said no, it was for her friend and purchased the card. Make sure to listen to people who are trying to warn you, and make sure you listen to your own feelings that something seems off!
Another kind of scam that is pretty common in the internet age is the romance scam. People meet online, but have never met in person. Things seem to move very quickly, with the scammers saying "I love you" in just a few conversations. Eventually they tell a sob story about being stuck in customs because they owe money and ask for help.
Long before I was a librarian I worked in the international department of UPS Customer Service. We got a lot of calls about romance scams, mostly involving the target thinking they were helping their boy/girlfriend ship things home to their family, when really they were helping to ship stolen goods. One woman insisted they were actually married, even though they had never met in person. "We got married online!" She wouldn't accept that that wasn't something that existed. Lonely people make easy targets.
Scott Cohn, Special Correspondent & Producer for CNBC's "American Greed"
After lunch we had another keynote speech from Scott Cohn. Originally, "American Greed" was only supposed to be six episodes, but they ended up with so many cases to use the show has almost reached 200 episodes so far.
"My goal is for you to leave here not trusting anyone who hasn't earned it" he said. "Your confidence and trust are yours to give, it's an asset like any other you have, and you shouldn't just give it away!" If there is anything he wanted to leave us with, it was how to keep our feet on the ground and pay attention.
Ephren Taylor did 16 million in church related fraud. He took his act on the road preaching the prosperity gospel, selling high yield promissory notes. People assumed the pastors had vetted and approved of him, so they trusted him. This type of affinity fraud is so effective that in Utah alone there is $2 billion in religious fraud a year.
There are questions you should ask yourself before you invest in anything new. Ask yourself why someone you have a non-investing relationship with is asking you to start having an investing relationship with. Is a job asking you for money up front in order to work from home? This is almost always a scam: a job is paying for your services, not the other way around. Is the person involved in actual investments? People tend to believe well known entertainers, but that doesn’t make sense… what does that have to do with investing? Just because a famous person or someone in your church is saying something is legitimate does not make it so.
Sometimes it can go the other way as well: Bernie Madoff was super ordinary seeming, which made him hard to peg as a scammer/criminal. He wasn't flashy or famous, just an unassuming man who didn’t seem desperate for people’s money. He managed to sucker some of the most sophisticated people on wall street and they in turn got others involved who trusted their credentials not realizing they themselves were being fooled. By suckering big names he was able to sucker those who trusted those big names. He was licensed, had credentials and people were willing to give him everything. The SEC went through an existential crisis because of his case.
"My goal is for you to leave here not trusting anyone who hasn't earned it" he said. "Your confidence and trust are yours to give, it's an asset like any other you have, and you shouldn't just give it away!" If there is anything he wanted to leave us with, it was how to keep our feet on the ground and pay attention.
Ephren Taylor did 16 million in church related fraud. He took his act on the road preaching the prosperity gospel, selling high yield promissory notes. People assumed the pastors had vetted and approved of him, so they trusted him. This type of affinity fraud is so effective that in Utah alone there is $2 billion in religious fraud a year.
There are questions you should ask yourself before you invest in anything new. Ask yourself why someone you have a non-investing relationship with is asking you to start having an investing relationship with. Is a job asking you for money up front in order to work from home? This is almost always a scam: a job is paying for your services, not the other way around. Is the person involved in actual investments? People tend to believe well known entertainers, but that doesn’t make sense… what does that have to do with investing? Just because a famous person or someone in your church is saying something is legitimate does not make it so.
Sometimes it can go the other way as well: Bernie Madoff was super ordinary seeming, which made him hard to peg as a scammer/criminal. He wasn't flashy or famous, just an unassuming man who didn’t seem desperate for people’s money. He managed to sucker some of the most sophisticated people on wall street and they in turn got others involved who trusted their credentials not realizing they themselves were being fooled. By suckering big names he was able to sucker those who trusted those big names. He was licensed, had credentials and people were willing to give him everything. The SEC went through an existential crisis because of his case.
Utah alone sees $2 billion in religious fraud a year.
TelexFree was a massive pyramid scheme about phone service to South America. You had to put money up front to get in on their work from home job promoting and marketing their service. They preyed on people needing income that didn't involve leaving the house or heavy labor. One victim had no health insurance and was desperate for money to pay for needed heart surgery. They put $20,000 into the company and was assured everything was going very well.
The scam was massive, sucking in 1.8 million people, and getting away with $3 billion. One of the perpetrators fled to South America and the other went to jail for 6 years. They knew which buttons to push so that people weren’t asking questions and were not reporting things to anyone. Often there was a language barrier which isolated people from law enforcement. I had to wonder if maybe some of the victims targeted were perhaps undocumented as well, as this involved phone cards for calling South America and he stressed that there was a common language barrier and extreme isolation. The Tips, Complaints and Recommendations page at the SEC accepts anonymous tips for those who do not want the government knowing who they are, but people are scared.
No matter what, do not put all your eggs in one basket. Never give anyone everything. Guard your confidence, trust and money, because by the time it gets to the restitution phase the money is often gone. It is very hard to collect from felons, and most will store the money in an off-shore account or something inaccessible so they can get to it after they get out of jail. If you get anything it’s almost always just a percentage of the original investment, and the amount you thought you earned on top of that doesn’t count for anything.
The scam was massive, sucking in 1.8 million people, and getting away with $3 billion. One of the perpetrators fled to South America and the other went to jail for 6 years. They knew which buttons to push so that people weren’t asking questions and were not reporting things to anyone. Often there was a language barrier which isolated people from law enforcement. I had to wonder if maybe some of the victims targeted were perhaps undocumented as well, as this involved phone cards for calling South America and he stressed that there was a common language barrier and extreme isolation. The Tips, Complaints and Recommendations page at the SEC accepts anonymous tips for those who do not want the government knowing who they are, but people are scared.
No matter what, do not put all your eggs in one basket. Never give anyone everything. Guard your confidence, trust and money, because by the time it gets to the restitution phase the money is often gone. It is very hard to collect from felons, and most will store the money in an off-shore account or something inaccessible so they can get to it after they get out of jail. If you get anything it’s almost always just a percentage of the original investment, and the amount you thought you earned on top of that doesn’t count for anything.
Charu Chandrasekhar,
the Retail strategy task force
Charu Chandrasekhar is the Assistant Regional Director, Division of Enforcement and Chief, Retail Strategy Task Force for the SEC. She showed us a series of videos called Notes From the Chairman, which hope to raise awareness and education, reducing community based fraud.
These videos are not just about fraud, but touch on things like compounding and diversification as well. One recommends you get rid of high fee, high interest rate debt products first: paying those off is your best possible investment. While debt is necessary, it's not a long term solution to anything. Get your financial house in order first, then worry about investing.
Then she showed a series of OIEA ads for investor.gov such as this one:
These videos are not just about fraud, but touch on things like compounding and diversification as well. One recommends you get rid of high fee, high interest rate debt products first: paying those off is your best possible investment. While debt is necessary, it's not a long term solution to anything. Get your financial house in order first, then worry about investing.
Then she showed a series of OIEA ads for investor.gov such as this one:
The SEC has also done a series of Animated shorts about keeping yourself safe. “Be aware before you share (your personal information)”
One way to know that the investment opportunity is a scam? If they recommend you use credit cards or wire money abroad. No legitimate investment adviser will tell you to charge your credit card to invest, as the high interest rate on charging to cash would destroy any chance of your having a return. Wiring money to other countries is very risky, and no legitimate adviser would recommend this either.
At the end she showed a video that was entirely in sign language about a scheme defrauding deaf people. IBC managed to scam more than $7 million from people, more than half of whom were deaf.
There is a Spanish section of SEC.gov, and all of their materials and tools are also available in Spanish. All resources are free to anyone who needs or wants them.
A side note: The Federal Trade Commission has a whole page of videos on protecting and educating yourself, and investor.gov has a whole section devoted to librarians!
One way to know that the investment opportunity is a scam? If they recommend you use credit cards or wire money abroad. No legitimate investment adviser will tell you to charge your credit card to invest, as the high interest rate on charging to cash would destroy any chance of your having a return. Wiring money to other countries is very risky, and no legitimate adviser would recommend this either.
At the end she showed a video that was entirely in sign language about a scheme defrauding deaf people. IBC managed to scam more than $7 million from people, more than half of whom were deaf.
There is a Spanish section of SEC.gov, and all of their materials and tools are also available in Spanish. All resources are free to anyone who needs or wants them.
A side note: The Federal Trade Commission has a whole page of videos on protecting and educating yourself, and investor.gov has a whole section devoted to librarians!
Panel: Case Studies From a law enforcement Perspective.
Moderator Lara M. Grey, Associate Regional Director at the SEC's New York office started off by making one thing very clear: "We take all tips seriously!
Paul Roberts is a Supervisory Special Agent at the FBI who worked on the Madoff case among many others. "The most important thing we can do is speak with victims and educate people so they don’t become victims" he said. There's no shame in getting scammed: "Even the FBI gets targeted! If we can fall prey, so can you, so don’t be embarrassed about coming forward." As insane as it sounds, one group targeted by affinity fraud is the FBI itself!
Sometimes the FBI can get consensual monitoring where they get to victims while they are still being scammed. They get them to wear a wire so to speak, and can have an ear in an actual meeting where the pitch or story is being discussed. Sometimes they get video of the opulent offices or get their hands on the fake paperwork and such. They even send undercover agents in to invest and become a willing victim. all of this plays really well in court. Occasionally just being up front and asking them works: the fraudsters get so cocky with their story that they think they can pull one over on the FBI and convince them that the whole thing is actually legitimate, not unlike what they do to their victims.
The investigation often takes a long time, but they try to go as fast as they can. They often work with the SEC who do some back office work while the FBI agents are in the field. In some cases this can speed things up several years. Often they can’t give victims any real info because it might interfere with or jeopardize the whole case, which can be difficult when victims are begging for information.
Paul Roberts is a Supervisory Special Agent at the FBI who worked on the Madoff case among many others. "The most important thing we can do is speak with victims and educate people so they don’t become victims" he said. There's no shame in getting scammed: "Even the FBI gets targeted! If we can fall prey, so can you, so don’t be embarrassed about coming forward." As insane as it sounds, one group targeted by affinity fraud is the FBI itself!
Sometimes the FBI can get consensual monitoring where they get to victims while they are still being scammed. They get them to wear a wire so to speak, and can have an ear in an actual meeting where the pitch or story is being discussed. Sometimes they get video of the opulent offices or get their hands on the fake paperwork and such. They even send undercover agents in to invest and become a willing victim. all of this plays really well in court. Occasionally just being up front and asking them works: the fraudsters get so cocky with their story that they think they can pull one over on the FBI and convince them that the whole thing is actually legitimate, not unlike what they do to their victims.
The investigation often takes a long time, but they try to go as fast as they can. They often work with the SEC who do some back office work while the FBI agents are in the field. In some cases this can speed things up several years. Often they can’t give victims any real info because it might interfere with or jeopardize the whole case, which can be difficult when victims are begging for information.
If the FBI calls you, call the FBI line to authenticate their ID.
There can be many reasons for a sentencing delay. If the fraudsters plead guilty it’s usually a quicker process. However, if there’s a trial there is usually a good bit of post trial work too. For one thing, it must be determined what percentage of this fraud each defendant is responsible for. The random secretary isn’t on the hook as much as the guy setting up and perpetrating the fraud, even though they may be tried as an accomplice. It has to be determined who knew what and how responsible they are.
What can you do to help? Call local FBI office with tips! The more tips they get about a scam, the more interest it generates and the faster more resources get directed towards an investigation. Also, if the FBI calls you, call the FBI line to authenticate their ID! Don't just take the person who called you's word for it. "We welcome it because it means you have a healthy skepticism." Rhonda seconded this: whenever she calls someone she tells them to google the number for the SEC and to ask for her, not to just trust her on the phone. That way they can be assured that she is who she says she is.
Throwing events like these gives the authorities more eyes and ears. Educating people about what to look out for and who to report fishy things to boosts society's immune system.
What can you do to help? Call local FBI office with tips! The more tips they get about a scam, the more interest it generates and the faster more resources get directed towards an investigation. Also, if the FBI calls you, call the FBI line to authenticate their ID! Don't just take the person who called you's word for it. "We welcome it because it means you have a healthy skepticism." Rhonda seconded this: whenever she calls someone she tells them to google the number for the SEC and to ask for her, not to just trust her on the phone. That way they can be assured that she is who she says she is.
Throwing events like these gives the authorities more eyes and ears. Educating people about what to look out for and who to report fishy things to boosts society's immune system.
David Stoelting is a Senior Trial Council for the SEC. His role is to take up cases that don’t settle. When a settlement doesn’t happen the SEC sometimes has no choice but to take the person to court. They can investigate bank accounts and look at records without the person or firm even knowing. They spend months, sometimes years looking at these records, analyzing where the money is going and proving that the investments are not going where they're supposed to.
By the time they go to court, it's usually with a big stack of papers to ask the judge to freeze an account. Agents can sit with a judge and shut down a firm before they even know what’s going on. They groom witnesses for trial, making sure they know what is happening, what to expect, and what their rights are. They counsel investors through the difficult realization that the person they trusted has been defrauding them, and that things are about to become much more difficult. There is often a lot of victim blaming from the fraudster during the case, and they try to prepare and arm them against such attacks.
By the time they go to court, it's usually with a big stack of papers to ask the judge to freeze an account. Agents can sit with a judge and shut down a firm before they even know what’s going on. They groom witnesses for trial, making sure they know what is happening, what to expect, and what their rights are. They counsel investors through the difficult realization that the person they trusted has been defrauding them, and that things are about to become much more difficult. There is often a lot of victim blaming from the fraudster during the case, and they try to prepare and arm them against such attacks.
Even IRA's can be twisted to defraud folks.
There are people who have built up their reputation, are totally legitimate, and then use their good reputation to flip it and start hawking unregistered promissory notes and such. The only way to protect yourself against this is to look up the product itself: if it doesn’t come up in investor.gov it’s probably a scam to be avoided.
Even things like IRAs, which are generally known as solid and trustworthy, can be twisted to defraud folks. Fraudsters use them to add legitimacy to their schemes. Paul Roberts chimed in and added that with IRA’s you can’t get your hands on them until you retire so it’s a great scam where you are pretty safe from victims looking for their money for a while. It takes the pressure off the fraudster, so you have to be careful and stay on top of things.
Even things like IRAs, which are generally known as solid and trustworthy, can be twisted to defraud folks. Fraudsters use them to add legitimacy to their schemes. Paul Roberts chimed in and added that with IRA’s you can’t get your hands on them until you retire so it’s a great scam where you are pretty safe from victims looking for their money for a while. It takes the pressure off the fraudster, so you have to be careful and stay on top of things.
Rhonda Jung has been a Senior Council at the SEC for over 20 years. She cautioned attendees on staying on top of things. "You can never be too vigilant" she said. "Ask to see all the documents, look up the investments yourself as well, and never ever take out a mortgage to invest!"
Haena Park was a Harvard grad who managed to get friends & family to invest a lot of money through her, but none of it paid out. She bragged about her prowess in currency trading and wracked up almost $20 million of losses for clients. She used about $3 million of the money invested to make payments to others so it seemed like she knew what she was doing, and just through word of mouth she suckered many, many people. She even sent faked account statements to investors so no one knew what was happening until it was too late.
The SEC works through all the numbers figuring out how much the person spent on themselves, how much they spent on the Ponzi making payments, setting up an office etc. The money they invest into having a couple people’s investments seem to pay off really well pays off in spades with referrals and new victims. The SEC looks at all of this and move as fast as they can, but it takes months sometimes and people get very impatient. It can be frustrating for everyone.
Haena Park was a Harvard grad who managed to get friends & family to invest a lot of money through her, but none of it paid out. She bragged about her prowess in currency trading and wracked up almost $20 million of losses for clients. She used about $3 million of the money invested to make payments to others so it seemed like she knew what she was doing, and just through word of mouth she suckered many, many people. She even sent faked account statements to investors so no one knew what was happening until it was too late.
The SEC works through all the numbers figuring out how much the person spent on themselves, how much they spent on the Ponzi making payments, setting up an office etc. The money they invest into having a couple people’s investments seem to pay off really well pays off in spades with referrals and new victims. The SEC looks at all of this and move as fast as they can, but it takes months sometimes and people get very impatient. It can be frustrating for everyone.
Edward Janowsky, the Exam Manager at the SEC has worked there since 1998. He warned that any legitimate investment vehicle can be used to defraud people. It lends the scam legitimacy and makes it hard to nail down whether it’s real or not. Investors should always ask themselves what the business is doing to make the money to pay back all your returns. If they don't seem to be doing anything to actually make money, it’s a scam.
Real estate is a category that is often used as an example of fraud ridden investing, but be wary of hot topics (CBD, Cannabis, Crypto) too. Hedge funds are very popular because there isn’t much transparency. which makes them seem exclusive and sexy.
Real estate is a category that is often used as an example of fraud ridden investing, but be wary of hot topics (CBD, Cannabis, Crypto) too. Hedge funds are very popular because there isn’t much transparency. which makes them seem exclusive and sexy.
Often the best thing you can do after calling the authorities is to do nothing.
The person perpetrating the fraud has to give the appearance of being rich, powerful, successful. No one questions it if someone is already rich: why would they take my money, they clearly don’t need it. Also, as Haena Park did, if the fraudster can show you that a couple people did really well it does more for them than anything they could ever tell you. As in writing: show, don't tell. If a scammer pays 2 investors well, they’ll get 100 more lining up behind them eager to invest.
One of the things the investigators struggle with is keeping people from doing anything once they realize it's fraud. It goes against your instincts, but the best thing you can do after calling the authorities is to do nothing. "Often as soon as we make an inquiry, the people call the fraudster and demand to know what is going on which can throw a wrench into the process" he said. They know it’s hard but ask everyone to stay calm and to do nothing. Sadly this is not often how things end up.
One of the things the investigators struggle with is keeping people from doing anything once they realize it's fraud. It goes against your instincts, but the best thing you can do after calling the authorities is to do nothing. "Often as soon as we make an inquiry, the people call the fraudster and demand to know what is going on which can throw a wrench into the process" he said. They know it’s hard but ask everyone to stay calm and to do nothing. Sadly this is not often how things end up.
Keynote speaker Geoffrey Berman
Geoffrey Berman, US Attorney in the Southern District of New York was the final keynote speaker.
Elder-fraud is particularly egregious and long lived. It is a major priority of their office. Older adults lose billions of dollars a year, plus there are physical, mental and emotional ramifications for them and their families. It is important for each district's office to have an elder abuse officer enforcing the Elder Abuse Prevention and Prosecution Act and establishing working groups to that effect.
Their sweeps have picked up over 500 defendants who were responsible for millions of cases of fraud. The Department of Justice has a section of their website devoted to elder fraud, the Elder Justice Initiative, with lots of information, including detailed descriptions of scams that are currently happening.
Prosecution is vital, but public outreach and education is at least as important. They seek to bring some justice, but also hopefully restitution money to victims. They hope their actions are a deterrence, get scammers off the street, gain insight on new scams and learn about new scammers. Any splashy news stories go far in promoting awareness and educating the public.
There are a lot of work at home scams targeting older folks who want to keep working but aren’t as mobile. Many don’t have enough retirement income, have medical bills piling up, and are desperate for income. More and more Americans are falling through the safety nets, and get caught up in scams instead. There are many others as well, including debt consolidation, investments, and fake lotteries that specifically target the elderly.
Their sweeps have picked up over 500 defendants who were responsible for millions of cases of fraud. The Department of Justice has a section of their website devoted to elder fraud, the Elder Justice Initiative, with lots of information, including detailed descriptions of scams that are currently happening.
Prosecution is vital, but public outreach and education is at least as important. They seek to bring some justice, but also hopefully restitution money to victims. They hope their actions are a deterrence, get scammers off the street, gain insight on new scams and learn about new scammers. Any splashy news stories go far in promoting awareness and educating the public.
There are a lot of work at home scams targeting older folks who want to keep working but aren’t as mobile. Many don’t have enough retirement income, have medical bills piling up, and are desperate for income. More and more Americans are falling through the safety nets, and get caught up in scams instead. There are many others as well, including debt consolidation, investments, and fake lotteries that specifically target the elderly.
As more Americans fall through our safety nets, they get caught up in scams instead.
Romance scams take advantage of the inevitable loneliness that accompanies age or losing a spouse. Often the scam artists pose as members of the military who are stationed abroad and will introduce victims to colleagues who are also in on it. Sometimes they dump money in a victim’s account and then transfer it into another's and another’s as a way to launder money and hide their tracks.
We need more public outreach and education. There are partnerships with the Post Office and SEC to speak with members of the public to prevent future crimes and ensure people report fraud. Elder fraud is under reported because they often don’t realize they’ve been defrauded or are too embarrassed about it. In one case a woman kept sending money even after the FBI showed her proof that this was fraud. On a personal note, I can attest as a family member was all but unreachable and kept sending her Social Security money to scammers even after several interventions with family and law enforcement.
What can you do to help elderly friends and family? Check in frequently and listen to what they tell you about things they are doing. You may see red flags they are missing. An objective ear is more skeptical than a hopeful one. It may not occur to someone that their “friend” is scamming them. Talk to caregivers as well to make sure they are ok, but also to see if they have concerns about possible scams. Tell people to shred everything that has personal info, and not to give out any personal info. The longer someone waits to report the harder it is to prosecute or even find the fraudster. If they are overseas it is even harder.
Community based fraudsters pray on the better angels of our natures, but together we can fight back.
We need more public outreach and education. There are partnerships with the Post Office and SEC to speak with members of the public to prevent future crimes and ensure people report fraud. Elder fraud is under reported because they often don’t realize they’ve been defrauded or are too embarrassed about it. In one case a woman kept sending money even after the FBI showed her proof that this was fraud. On a personal note, I can attest as a family member was all but unreachable and kept sending her Social Security money to scammers even after several interventions with family and law enforcement.
What can you do to help elderly friends and family? Check in frequently and listen to what they tell you about things they are doing. You may see red flags they are missing. An objective ear is more skeptical than a hopeful one. It may not occur to someone that their “friend” is scamming them. Talk to caregivers as well to make sure they are ok, but also to see if they have concerns about possible scams. Tell people to shred everything that has personal info, and not to give out any personal info. The longer someone waits to report the harder it is to prosecute or even find the fraudster. If they are overseas it is even harder.
Community based fraudsters pray on the better angels of our natures, but together we can fight back.
Closing Remarks by Matthew Diller
Fordham Law’s Dean Matthew Diller made the closing remarks, mostly thanking those who attended or spoke, but also reiterating the importance of protecting people against these scams. It isn't just about protecting the people themselves, it is also vital to protecting our country and our economy over-all. "It is vital to the American Dream, and protecting law enforcement’s ability to keep us safe and on track."
RSS Feed