The big scammers can ruin your life and your business

Familiarity breeds trust and greed can overtake our common-sense approach to our money.

Several years ago, a client called to ask if I would accompany him to Nigeria to complete a transaction that would recover $100 million from the estate of a dead general. My client would receive $10 million for assisting. After several hours of me explaining the absurdity of the plan, and the dangers involved, the client cancelled his plans. But I did meet someone that did go. His family paid a $50,000 ransom for his release from his captors.

In my last blog, I listed a number of the smaller scams. Here are a few of the more notorious. They are tried and true variations of ones that have been successful. They continue in use because they are successful.

  1. The boy next door has grown up and is investing in real estate. He has a beautiful sports car, takes exotic trips and just cashed in on a “big deal.” You meet him while visiting his parents and are impressed with his stories of success. He sees your tongue hanging out and asks if you would be interested in learning about what he does. Of course you would. Three days later he shows up with documents to review with you and, because he is so nice, you decide to let him invest for you.

    Fifteen months pass and you haven’t received the promised updates and distributions. You can’t reach him and his parents haven’t heard from him. You are so worried you see a lawyer. The lawyer sends letters, and then you hear he is bankrupt. There are no investments, just a pile of debts and an ongoing criminal investigation. He goes to jail. Your money is gone.

  2. A client dealt with a financial advisor for many years. The advisor now has something special to offer to select clients. Because it is special, the advisor will handle the investing, and the client will make out the cheque directly to the advisor. Again, no distributions, no contracts, and then no money. The client’s money bought him drugs and paid off debts. The advisor went to jail.

  3. A client’s business went paperless and suddenly he could not access the company data, but could access his email. When he opened the email there was a message “restore your data.” He clicked it and was told his data had been encrypted and was being held for ransom and the key to unlock it would cost $50,000.

    Unknown to him, someone had accessed his computer and encrypted the data. He had no back up. He made frantic calls to Internet security firms, but given the time it would take and the cost involved for a work-around, paying the $50,000 was the best alternative.

Some closing words:

When presented with an opportunity to realize extraordinary gains, check the promoter’s track record and get sober advice. Does the person or firm presenting the opportunity have anything to lose if they commit a fraud? Do they have errors and omission insurance, are they licensed or risk the loss of a professional designation?

Perform security reviews on your business processes and monitor employee activities.

Keep the conversation going

What would you have done in the above circumstances?  Post a comment below.

Disclaimer

The views and opinions expressed in this article are those of the author and do not necessarily reflect that of CPA Canada.

About the Author

Stan Swartz, CPA, CMA, CFP, CMC

Stan is president of Infomoney Solutions. Previously, Stan was in public practice, industry and government. Stan now works with business owners and individuals to increase their financial literacy and become enlightened in financial management. Stan’s motto is “knowledge + solutions = more.” You can reach Stan through email at stan@infomoney.ca, LinkedIn or Infomoney.ca on Facebook.