Don’t Be Trapped by the Trappings

“It was clear to me that the more you showed people that you didn’t need money, the easier it was to attract money.”

My biggest hurdle has always been the same: getting people past the powerful cognitive bias that convinces them that they are too smart, savvy, or sensible to ever be taken in by an investment fraud. Until people are equipped to turn around and examine their own thinking, they cannot shake that hardwired defense mechanism. And, until they can clear that hurdle with me, nothing I say about how to investigate a prospective investment can do them any good. In addition to teaching them about the cognitive biases, I tell my audiences about all of the very wealthy, successful, and professionally suspicious people who have fallen for well-disguised scams, in hopes that concrete examples will lead them to the thought, If those people could fall for it, maybe there is something else I need to know in order to protect myself. A recent case out of North Carolina gives me another example to share. According to the Charlotte Observer: (more…)

Make Some Noise

He took vacations to Hawaii, Cancun, and Mexico, and bought cars, clothing and jewelry.

From 2001 to 2007, people all across the southeastern U.S. believed Gary Clyde Keever when he said that he could earn them a stable return by trading mortgages.  They turned over their savings and enjoyed reading the periodic statements he’d send them, showing the impressive returns.  In fact, Keever was simply spending investor’s money as if it were his own.  He took vacations to Hawaii, Cancun, and Mexico, and bought cars, clothing and jewelry.  According to The Charlotte Observer: (more…)

$40 Million North Carolina Ponzi

And what you think of when you visualize the threat to your nest egg is a caricature, not the real thing.

Keith Franklin Simmons bought almost $5 million in real estate.  He invested in a company that promoted ultimate fighting tournaments.  He traveled by private jet, and paid for breast-augmentation surgery for several of the women who traveled with him. According to a jury in North Carolina, he paid for those things with some of the $40 million he stole from more than 400 investors. (more…)

SEC Charges Wachovia Brokers with $8 Million Fraud

The wise investor remembers the Jekyll and Hyde nature of banks and evaluates bank-based brokers as he or she would any other broker.

According to the U.S. Securities and Exchange Commission, two Wachovia brokers traded options in their clients brokerage accounts without the customers’ authorization.  The SEC charged William K. Harrison and Eddie W. Sawyers with violating the antifraud provisions of the federal securities laws.  According to the SEC’s press release: (more…)

The Teacher Turned Day Trader

Day trading does not work because of the transaction costs.

According to WRAL in Raleigh, North Carolina, former teacher Ronnie D. Rainey convinced several people that he was a skilled day trader, making big profits through in-and-out trading of stocks.  He offered people the chance to capitalize on his skill by giving him their money to trade.  When he could not generate the promised returns, he sent his investors phony account statements showing that they were earning the promised returns.  Authorities estimate that he lost $3 million of his investors’ money.  When they caught up to him, Rainey was in Oklahoma.  According to WRAL:

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SEC Shuts Down Fraudulent Scheme Early

The Madoff case notwithstanding, the U.S. Securities and Exchange Commission (SEC) is very good at shutting down fraudulent investment schemes early.  A recent case illustrates how the SEC acts quickly when it gets wind of an ongoing fraud.  The SEC has charged  David L. Hersh (Hersh) of Raleigh, North Carolina of raising more than $2 [...]

The Madoff case notwithstanding, the U.S. Securities and Exchange Commission (SEC) is very good at shutting down fraudulent investment schemes early.  A recent case illustrates how the SEC acts quickly when it gets wind of an ongoing fraud.  The SEC has charged  David L. Hersh (Hersh) of Raleigh, North Carolina of raising more than $2 million from 12 investors by telling them that he would invest their money in an options trading program.  According to the SEC’s Complaint, Hersch misappropriated $575,000 of the money and deceived investors and prospective investors by showing them false trade confirmations and other documents which he created.

For the twelve who lost their $2 million, it may seem like the SEC acted too late.  But the SEC cannot act until it gets wind of a scheme.  That typically does not happen until the scam operator can no longer raise new money and begins missing payments to current investors.  By that time, the scam operator has spent all of the money raised and a Receiver appointed by the court to recover that money will have to work hard to liquidate the scamster’s assets and return at least something to defrauded investors.

As Madoff demonstrated, investment schemes can run for decades.  Even taking Madoff’s curve-busting performance out of the equation, it is not unusual for Ponzi schemes to operate for five years or longer.  That the SEC shut down Hersch before he could claim the thirteenth victim shows how quickly the SEC can act if it learns about a possible fraud.

The trick, then, is to bring a possible scam to the SEC’s attention closer to its beginning than its eventual end.  Individual investors have the power to do that.  A pre-investment investigation by a professional investor protection company can not only help the investor avoid a Ponzi scheme, but also bring the matter to the attention of those with the power to shut it down.  When Investor’s Watchdog alerts its clients to a possible scam, it also alerts the SEC, which can then close the fraudulent enterprise before it claims its next victim.

You have the power to protect others while protecting yourself.

 

SEC Files Emergency Action to Halt Alleged North Carolina-based Ponzi

The U.S. Securities and Exchange Commission (SEC) has filed an emergency enforcement action to halt an alleged Ponzi scheme operated by Sidney S. Hanson and Charlotte M. Hanson of Charlotte, North Carolina.  According to the SEC:

The U.S. Securities and Exchange Commission (SEC) has filed an emergency enforcement action to halt an alleged Ponzi scheme operated by Sidney S. Hanson and Charlotte M. Hanson of Charlotte, North Carolina.  According to the SEC: (more…)

 

SEC Stops Another Alleged Ponzi Scheme

The U.S. Securities and Exchange Commission (“SEC”) - up to its eyeballs in work - has stopped another alleged Ponzi operation in its tracks - this one in Mooresville, North Carolina.  The SEC charged Shelby Dean Martin (“Martin”) and his companies, D. Martin Enterprises, Inc. (“DM Enterprises”) and DM Ventures, LLC (“DM Ventures”), with securities fraud.  According to [...]

The U.S. Securities and Exchange Commission (“SEC”) - up to its eyeballs in work - has stopped another alleged Ponzi operation in its tracks - this one in Mooresville, North Carolina.  The SEC charged Shelby Dean Martin (“Martin”) and his companies, D. Martin Enterprises, Inc. (“DM Enterprises”) and DM Ventures, LLC (“DM Ventures”), with securities fraud.  According to the Commission’s complaint: (more…)

 
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