Thursday, January 04, 2007

Gullible's Travails

Albert Einstein, who is generally considered to have been a pretty smart cookie, once remarked that only two things were infinite – the universe and human stupidity. He added that he was not totally sure about the universe, however.

I feel that he may have a point. The gullibility of the general public appears to be unlimited. A year ago I wrote a book, “Just Numbers on a Screen,” exposing a major offshore investment swindle. Some 80,000 optimists had plonked their hard earned cash into a project that was guaranteed by the promoters to return them 600% per annum. Now it is generally accepted that one of best of current financial money managers is Warren Buffet who has failed to exceed returns of more than 35% or so over the past few years. Obviously he doesn’t know what he’s doing.

An earlier book of mine was “One Big Fib,” the story of a fraudulent offshore bank. However, although a total swindle that ruined many lives, their promised rate of return was a measly 100%, so clearly we are making progress in this business.

Now both of these operations, although differing in detail, relied upon the tried and true efforts of a Mr. Ponzi who, years before, had conceived the happy notion of attracting depositors by paying ludicrously high returns from the funds being received from new investors. It saved all that tedious business of having to invest funds, enabled wonderfully impossible rates of return to be advertised and, provided you were slippy enough on your feet, you could always scarper when the mugs stopped sending you money. Mr. Ponzi himself neglected to pay attention to this last requirement and spent the rest of his life in jail, but many of his students have profited subsequently from the plan.

With the advent of the internet, things looked up in the industry. Websites are cheap and easy to set up, giving a semblance of status and stability, ownership is easily concealed and the offshore International Business Company (IBC) with its inbuilt secrecy, provided a wonderful cover for nefarious operations.

Having researched two of these interesting and totally fraudulent schemes, I’ve been interested ever since in this bizarre underbelly of the investment world. A quick search of the internet reveals an appallingly large number of similar “pie in the sky” schemes, offering returns which are not only beyond the dreams of avarice but are also beyond the realms of commonsense. Significantly, although many of the promoters claim to have large investors, their offerings are always pitched to the small and naïve punter, who, even though he or she may know deep down inside that it’s all a fraud, knows that, under the rules of the game, if you get in early you might be able to get out with a substantial profit. That this profit will come at the expense of the later suckers rarely impinges on their conscience. A basic rule is that, due to confidentiality requirements, no accounts are available to prospective clients. A particularly reprehensible aspect of many of these programmes is that emphasis is laid upon charitable donations or religious connotations, giving many the fuzzy feeling of “doing good” by investing their money. Rarely do charities benefit very much from this and, of course, it is in effect “dirty money,” obtained by means which are illegal in most jurisdictions.

And when the house of cards, which are all such pyramid schemes, collapses, as all such programmes will, courtesy of the internet and the International Business Company Act, the victims will have nowhere to turn to for redress.

The internet is awash with discussion forums on these so-called High Yield Investment Programmes and whilst the high yield part might be valid for a time, there is rarely any investment component. And once the mugs stop sending cash, the music stops.

But what has struck me as I riffle through these forums is that, once disappointed by the failure of one incredible opportunity, many just move on to the next, presumably in the hopes of cashing out early next time. It is, of course, a form of larceny that law enforcement has a hard time catching up with.

But the recent restrictions placed upon the international banking industry, coupled with the much wider use of the term “money laundering” to describe almost any illicit handling of funds, will do much to put a crimp in the activities of those who would wish to trade on the misery produced by their activities. And under these rules, the agents often used to bring in new business will be as culpable as the promoters, and the reach of law and order now expands worldwide.

The “get rich quick” mentality that provides the promoters with their fodder is as destructive to people as are drugs in the community.

Einstein was right – but he should also have added greed and gullibility.

If you know of anyone considering putting their money into such schemes, I suggest you tell them to read my books, which are available from Amazon, Barnes & Noble etc. You may save them a lot of money.


Post a Comment

<< Home