The “.44 Magnum Investment” Fraud

“[H]e named the program accordingly because “when people found out they’d been ripped off, they would buy a .44 Magnum and shoot themselves in the head.”

Another investment con and more personal tragedies that could have been prevented have occurred.  This time the SEC has charged Geoffrey H. Lunn of Sheridan, Colorado with operating a $5.77 million investment scheme with marketing assistance from Darlene A. Bishop of Odessa, Texas, and Vincent G. Curry of Las Vegas.  Lunn falsely told investors that he was vice president of a firm whose executives had connections to Dresdner Bank. The fictitious firm, Dresdner Financial, with a name similar to a Dresdner Bank, a legitimate bank, apparently gave Lunn an aura of credibility with investors. (more…)

If It Sounds Too Good To Be True, You Are Talking To An Amateur

For every one buffoon who promises ridiculous returns, there are several competent scamsters who know better than to do so.

For the last several decades — at least the last five during which I have been around — we’ve been fed well-meaning but dangerously incomplete information about how to avoid the financial ruin that comes with investing in a scam. The old axiom: “If it sounds too good to be true, it probably is,” makes its way onto every list of how to keep your nest egg safe. What makes the axiom so dangerous is that it is almost true, as far as it goes. Because, of course, if an investment sounds too good to be true, it is (not “probably  is”) too good to be true. Take a look at the story of a recent case in which the axiom would have protected people who heeded it. Then we’ll talk about why the axiom, by itself, will never be enough. According to Courthouse News Service: (more…)

The Jed Clampett of Solar Energy

There is another energy sector scam that is pushing for its place in the energy scam pantheon.

There are so many oil and gas scams out there that we could launch a sister blog that covered nothing else. The profit potential of fossil fuels is long established and every investor dreams of becoming the next Jed Clampett. But there is another energy sector scam that is pushing for its place in the energy scam pantheon: the solar energy scam. This week the SEC filed an enforcement case that highlights the rise of such scams. According to the SEC’s release: (more…)

SEC Nails Convicted Felon CEO

No competent investment criminal will pass up the chance to influence potential victims through the name of his company.

We’ve written before that the recidivism rate is high among investment criminals. Those few who spend time in prison typically spend their visit to the Gray Bar Hotel planning the scam that they launch on their first day of freedom. The SEC believes that it has caught just such a character in Texas. According to the SEC’s press release: (more…)

The Easiest Scam To Sell

The profit potential is as obvious as insincerity on a politician.

Oil and gas fraud will always be with us. The profit potential is as obvious as insincerity on a politician. Folks don’t have to be convinced that a successful oil and gas investment can make them a lot of money. Such investments, therefore, are relatively easy to turn into extremely successful investment scams. According to KTRK-TV (Houston): (more…)

Investors Say Morgan Stanley Broker Put Them in a Ponzi Scheme

Did your broker convince you to buy a hedge fund, limited partnership, promissory note, non-traded REIT, or some other alternative investment in the past four years?

Chances are that you don’t recognize most of the names that pop up in our blog posts as the targets of civil or criminal enforcement actions. That does not mean that well-known brokerage firms are never involved in the kind of misconduct that leads to those actions. According to Courthouse News Service: (more…)

Double Identity

You’d be surprised how many use another name.

What name would you choose if you had to go by an alias? Famed Ponzi scamster Lou Pearlman chose A. Incognito Johnson. I think I’d go with something like Elvis Powers or Bono Von Victor. Most folks don’t reach quite that far. But, you’d be surprised how many use another name. Authorities in Texas have nabbed one. According to mySA: (more…)

SEC Alleges Cross-Border Fraud By Texas RIA

All RIAs are not created equal.

Last week we posted on a case in which U.S. fraudsters targeted elderly investors in the U.K.  Today brings a story about a U.S. registered investment adviser (RIA) who allegedly defrauded a client in Mexico. According to the SEC’s press release: (more…)

Texas Oil and Gas Attorney Indicted

Powerful cognitive biases common to all healthy humans make you want to use professional degrees and apparent affluence as substitutes for a meaningful investigation.

A recent case out of Texas gives us a chance to revisit a basic due diligence tool that can help you keep the nest egg that you worked so hard to accumulate. According to Dallas Observer: (more…)

Affinity Fraud Targeting Christians Teaches Essential Lesson

We haven’t yet learned to recognize those cognitive biases in our own thinking and account for them in our financial decision-making.

When you read about the promises made in this scam, which the SEC shut down this week, pay attention to your initial reaction. After you’ve read about the case, we’ll talk about those reactions. According to the SEC’s press release: (more…)

Pipeline Fraud

When it comes to unregistered investments, there is no safety in numbers.

If you stay on top of the news, you’ve heard the controversy surrounding the President’s decision not to support the Keystone Pipeline project that would have run a pipeline from southern Canada all the way to the Gulf of Mexico. You might even feel strongly about it one way or the other. But what you may not have focused on is how news about the pipeline has made you accept the proposition that oil and gas projects generate a profit. Of course, some do and some don’t. But you can be certain that there are thousands of investment fraudsters taking advantage of the public’s attention to oil and gas ventures. Last week, the Department of Justice announced a criminal conviction in a case that is recurring with different players in many places right now. According to the DOJ’s press release: (more…)

YouTube Used in Alleged Investment Scam

Those are the scams that make up the current fraud crisis, an epidemic of fraud so bad that it may make us forget Bernie Madoff.

It was inevitable, I supposed. Eventually every new media space is infiltrated by fraudsters. That’s what the Texas State Securities Board is alleging happened when James Elton Warr and his company, Warr Investment Group, used YouTube and Internet advertising to attract investors to an investment that promised to return 8 percent per year. According to  PR-Canada.net: (more…)

Hyperbole

If the experts are right, there are 200,000 sociopaths within fifty miles of where I live.

I sometimes I feel like the audiences at my speeches think that what I say is hyperbole. I tell them that there is a tsunami of investment fraud breaking over the investing world. I say that this storm might make us forget Bernie Madoff. I’d tone it down if I thought I was being over-the-top, but I don’t think that I am. I feel like the amateur astronomer who has discovered an earth-killing asteroid approaching and wants to warn everyone. A case out of Texas helps make the point. According to the Houston Business Journal: (more…)

An Unsuccessful ‘Steve Miller Band’ Attempt

Others try to make sure no one looks for them by making it look like they’ve committed suicide.

Some of our most entertaining posts have been about scamsters who pull a Steve Miller Band (Take the Money and Run). Most leave the country. Some stay away for more than a decade.  Those guys are the answer to one of the questions I get most often at my public speeches: “Do these guys really think that they can get away with it?” Sure they do. In July we posted about Michael R. Rouse, who decided not to show up for his sentencing in Texas after having been convicted of fraud and money laundering.  Now comes word that Rouse has not been paying attention to what successful SMB scamsters have done. According to The Miami Herald: (more…)

What if the Person Who Advises You Falls for a Scam?

Every healthy human brain comes equipped with certain cognitive biases that make us especially vulnerable to investment fraud.

Most of Bernie Madoff’s victims never heard his name until his decades-long charade blew up. They didn’t seek Madoff out. They never gave him their money, directly anyway. Instead, they entrusted their nest eggs to their local investment adviser, the person who had faithfully helped them make good investment decisions for years or decades. And, their local investment adviser turned it over to Madoff. This week, the SEC commenced an enforcement case that reminds us that even investors who have a perfectly honest investment adviser are vulnerable to investment scams. According to the SEC’s press release: (more…)

Who Knows Better How to Rob a Senior than Another Senior?

Time on the planet brings wisdom to most, but it can’t erase a willingness to commit fraud.

Most of us were raised to respect our elders. And it’s proper that we do so. But, it’s also wise to remember that old people are just young people who’ve been around for awhile. Time on the planet brings wisdom to most, but it can’t erase a willingness to commit fraud. Prosecutors in Texas have found one such character.  This week, John Langford, 77, was sentenced to 15 years in prison for an investment scam that took more than $6 million from his fellow senior citizens. According to the Amarillo Globe-News: (more…)

Also Known As . . .

If you want to avoid a fraud, you have to look for a fraud.

When was the last time you used an alias? Probably not since that time in college when you used your roommate’s name to do something you suspected you might regret in the morning. Aliases are not something that law abiding people — with the exception of authors who write under a nom de plume — use. We therefore tend to think that very few people use them. But that’s not accurate. There are thousands of people using them right now. If you work in the city, there is likely at least one such person in your office building. But why? For the same reason that you used your roommmate’s name. They’ve done something that they don’t want anyone else to know about. Prosecutors in Texas believe they have found one such person. According to My SA: (more…)

No Honor Among Thieves

There is a food chain in the investment fraud world, and they don’t mind eating their own.

Believe it or not, it isn’t unusual for Ponzi scamsters to fall victim to investment fraud. HoustonPress is reporting that Robert Copeland, serving more than 121 months for taking $45 million from 125 people, lost $10 million to a foreign currency scam. According to the HoustonPress report: (more…)

SEC Registered Investment Adviser Charged with Running a $10 Million Ponzi Scheme

Learning about just the first level of due diligence will save hundreds of millions of dollars that would otherwise be lost forever.

There are different levels of due diligence — the process by which savvy investors size up an investment opportunity or a financial adviser. Most investors never use any of them (although they think they do).  We can, therefore, make tremendous strides in customer protection and cleaning up the investing landscape by educating investors large and small about the various levels of due diligence. Learning about just the first level will save hundreds of millions of dollars in money that would otherwise be lost forever. Every level of due diligence thereafter saves another chunk of what would otherwise be lost.  Last week, the SEC filed an enforcement action in a case that illustrates the importance of investigating at least two levels down.  According to the SEC’s press release: (more…)

SEC Takes Emergency Action Against Fraud that Targeted NCAA Coaches

The first raindrops in the next investment fraud storm have already begun to fall, and the worldwide investment community faces a tsunami that threatens to make us forget Bernie Madoff.

Last week we posted about the case of J. David Salinas who committed suicide as an apparent Ponzi scheme came to light. As reported by Sports Illustrated, Salinas’s clients included several NCAA basketball coaches. The SEC has now taken emergency action against others who were allegedly involved in the fraud. According to the SEC’s press release:

(more…)