Nobody wants to be the victim of a financial scam, yet they are becoming more prevalent and exotic every day. The story of one such incident, that Steve relays in this podcast, is fascinating, terrifying and informative all at the same time! Episode 110 of Plan For Life is a must listen, and a must lesson, for all of us.
Steve:
Welcome to Plan for Life now episode one 10. Happy leap year, Dave.
Dave:
Oh yeah, that’s right. That’s today. I should be on top of this. Happy leap year, February 29th. Awesome.
Steve:
All. We’ve got two wonderful support staff that work for us, Amy and Michelle, and Michelle’s actually a leap year baby, so I won’t announce how old she’s turning today, but today is her birthday.
Dave:
I saw something in one Happy birthday, Michelle. I saw something in one of the news organizations that a group of people of all different ages take a trip somewhere every year, every four years to celebrate. They’re all leap year babies of various ages and they go away somewhere. These are probably mostly baby boomers like me because they have the time and money maybe to go away every four years and they all look kind of older, but that’s kind of a cool thing to have in common.
Steve:
Yeah, that’s unique. Definitely unique. Yeah. So we’re here recording on wonderful February 29th and let’s just start things off talking about the year so far, been a pretty good year for the stock market so far. I was just looking s and p 500 up 6.64% year to date. I didn’t look up the nasdaq, but I’m sure it’s up a lot more than that. And if you look at last 12 months for the s and p 500, up 28%, so pretty good returns in the market and it’s amazing that if you just think about 14 months ago, it was just this foregone conclusion that we were going into a recession. It wasn’t a question of if it was just when will it be first quarter, second quarter, fourth quarter, whatever, and now maybe possibly we’re going to have this soft landing or no landing scenario. It seems
Dave:
Possible. Yeah, it’s always the same. It always just boils down to when things aren’t good and there’s such a temptation to move some of your money that was in stock, just put some, Hey, I’m going to take, if I’m a 60 40 person, I’m going to be 50 50 stocks of bonds for a while while things are down, and then just when things get better, I’ll go back and change my portfolio outlook. That’s another way of sort of a soft way of saying selling low and it never makes sense. You get rewarded in this markets in the long run for just holding off. If it makes you feel better not to look at your statement when things are down, down, just do that.
Steve:
Right,
Dave:
Because you get penalized for waiting till things get better and making any move really.
Steve:
Yeah, I mean in this ideal world where we can predict the future, it would be fantastic to say, okay, I think market’s getting a little overheated. Let’s sell. We’ll get back in when it’s gone down a little bit and then we’ll buy in just at the right time. It just doesn’t work. I mean, you’re either too early, you’re too late, you get the timing all wrong. You wind up sitting in cash. I love the idea of it. I just doesn’t work.
Dave:
No, not really. What works are the calls we get when people say, Hey, the market’s down right now. Can I move a little bit of my safer money of my bonds or put some cash into some stocks or equity funds? Now that one makes sense.
Steve:
Unfortunately, Dave, the calls to do that are outnumbered de to one by the ones that, oh, well the market’s down right now and let’s just get conservative just for now. Just for now. And then when things get better, we will change.
Dave:
That’s the phone on our desk that we labeled crickets, because that’s what you hear chirping when things are down, people dying to put money in the market. But yeah, and I would say obviously our clients, this is not you if you’re listening because I would say across the board, with the exception of just a couple, while our clients might be upset and call us a little bit and worried they don’t, as a general rule, pull the trigger, I’m going to go with 97% of them have stayed the course wisely.
Steve:
So I wanted to talk about today, Dave, something we’ve never really talked about this stuff, or at least certainly not dedicated a whole show to talking about financial scams and all the things that have been going on. So let me lay the groundwork here. I want to tell one big story of a friend of mine and a scam that he dealt with, but as he told me this and just he told me this story and it just kind of blew my mind. This, it’s all related to cryptocurrency and Bitcoin and all this. He told me this story and I’ve been amazed by it and repeated it to a lot of friends and whoever, and I was at the dentist on Monday and my dentist, this guy, he is a real big character. He’s a funny guy. One of those people, huge personality. I think if you’re a dentist and you want to kind of maintain your sanity sometimes I think you have to have a little sense of humor there. Everybody’s not thrilled to come see you all the time.
Dave:
Yeah, I have dentists like that too. Just the interjection, the problem with them, I like that as you know, I like talking, but when you’re in the dentist chair, they’re saying, yeah, role.
Steve:
Well, to be clear, it was actually my kids were at the dentist, but I had to be there to drive ’em there and all that. So I was not being examined to have Mr. Thirsty in my mouth. So he knows what I do and he always loves to talk business with me. He’s like, ah, what’s been going on? What are you seeing? And this was just a story that I thought that he would like. So I told him the story I’m going to tell everybody here in a minute, but it is a financial scam story. But I thought it was interesting because I tell this story and then the hygienists start coming in from the other examining rooms and they’re telling their stories. They’re like, oh, financial scam story. The first one, she comes in and she’s like, I had this friend who thought that she won the Publisher’s Clearing house, and what they told her was, whoa, hey, you won the publisher clearing house, but you’ve got to pay us for the escrow or taxes or something.
And so this woman sent them $18,000 because she had won Publisher’s Clearing House. So I thought it was interesting that so many people had their own personal stories of going through this. Another one, this woman, this other hygienist was telling who’s saying, yeah, I got this call and it was this guy who claimed to be a DE agent. And he even texted me his ID and she was like, I know to look out for these things, but I started believing that I had done something wrong and that I needed to pay off this debt that they said I owed.
Dave:
You know what? I know what your story is and I’m not going to interrupt it, but I know it’s not these scams, it’s different scam. So on these scams, I always think my age group and older, I’m 62, are targeted big time for good reason. A lot of times we might answer the phone and in general, they just look at general net worth of the people. They’re scamming if we’re going to get some money. We want people who have more money in general, more disposable income and stuff like that. But one thing that most of us have in common is that we abide by the law. We live our life normally, and we don’t have to worry about something we get in an email or a text or a phone call that says, we’ve done something wrong or we must react to something. Now, I mean, I always think that when I get scammed upon, which is almost every day, I shouldn’t say every day, but the rest of us, your story is not,
Steve:
Well, this one’s a little different because most of the scams rely on this sense of urgency, the sense of you’ve forgotten to pay a bill, you’ve forgotten to pay your taxes, you’ve got to pay this back right away. This one was a little different, and this one really hit me hard. So this is my friend, we’ll just call him Bob. I don’t want to broadcast his name all over the place, but Bob, he’s in the financial industry, so he’s not an advisor, but he’s in the financial industry. So he knows about stuff like this. Dave, you and I, we’ve got to do compliance training every year and they talk about financial scams and things like that. So not that it protects us from getting scammed, but it certainly raises your antenna so you’re a little bit more aware of it. Alright, my friend Bob, he’s just sitting on his phone one day scrolling through Instagram, just a perfect time killer there or you’re just not really doing anything.
And he sees an ad on Instagram there for some sort of cryptocurrency, learn about investing in Bitcoin and cryptocurrency. And like I said, he’s in finance, but he doesn’t know much about this. So he figures, I think I should probably learn about this. Anybody who’s finance or finance adjacent, you should probably keep up and learn about these things. So he clicks on this ad, he signs up to go to attend virtually a seminar talking all about cryptocurrency, and he goes to it. It’s actually on WhatsApp, so he’s listening and it’s this professor, and I don’t know where the professor is supposed to be from, but he’s talking about cryptocurrency and all this trading stuff. And it turns out that it’s a daily thing where every night at seven o’clock, this professor gets on, talks about all this crypto trading. And so Bob goes to this for a week or so, and inside the WhatsApp thing, he can chat with other people who are attending the seminar.
So it looks like there’s probably 50 or 60 different people attending there. So eventually after he is been going to this kind of following along, he starts up some chats with people and they’re like, Hey, my name’s Karen. I live in California. I’m a nurse. He starts chatting with them. Yeah, I started using some of these trading strategies. They seem to work pretty well, blah, blah, blah. Long story short, he puts in $2,000, puts in $2,000, and he starts trading based on this professor. So every night he’s going there, there’s all this chat, and they’re going into these cryptocurrencies where they’ll trade into him and the professor tells them when to trade out of them. And actually the first couple of weeks he actually got wiped out because he wasn’t following what they were saying. So he put in a couple thousand dollars, but he wasn’t attending these chats and his value, he kind of missed the trading, got wiped out.
He’s like, all right, I’ll put in $2,000 more. He takes that $2,000 starts following their trading, he turns it into 20,000. Oh, it’s pretty good. That’s a 10 x return there. So he is getting a little more confident, puts in a little bit more money eventually. And all along this time, he’s getting to know some of these other people, Karen in California and Rick in New York and all these other people. So he got these friends that he’s made here and he’s trading eventually, he winds up putting in about half a million dollars. This is from his retirement account and he’s in his early sixties, so it’s money. He’s saved up, he’s trading, he’s going along. He gets to a point where his account value is at $20 million. Crazy. Imagine this guy, he does well, he is got money, but he’s not ultra rich. Now all of a sudden he’s taken 500,000 and he’s turned it into 20 million.
And he starts talking with the people. The administrator runs the chat room and the seminars and everything, and he said, gosh, I think I should take off a million or 2 million something off of this to just kind of put some money away. And the woman who was helping him, she said, Bob, I think maybe you should take off half of your gains. And he said, okay, that sounds like a pretty good idea. I mean, you made 20 million, take 10 million off, 10 million off. So he starts talking with the account people and they say, okay, here’s what we’re going to need. We’re going to need your bank account number, routing number, your driver’s license, blah, blah, blah, provides all this stuff to them. A week goes by with a lot of, well, it’s working, it’s processing, blah, blah, blah. Eventually after a week, they say, oh, well, here’s what we forgot to mention.
The professor gets 7% of any of your gains. So 7% of $10 million, that’s $700,000. Now, at this point, my friend Bob is saying, I don’t care. Give the professor his 7%. Go ahead. That’s fine. I didn’t know that, but all right, give it to him and I’ll just take my 9.3 million and be happy. And they say, well, no, no, no, because of blah, blah, blah laws and this and that. We can’t take it out of your gains. You need to wire us $700,000. And this was the moment that he realized it was all a scam, was the moment where he said, oh no, this is not good. And it really just all started to unwind. They wanted him to send this $700,000. Eventually he reached out to somebody, a journalist who had written articles about this type of scam, and the journalist actually dug into the weeds with him and went through the transactions that he supposedly made.
Now, here’s something, it might be a little bit in the weeds for people who don’t know about cryptocurrency and blockchain and all of that, Dave, if I sell a Bitcoin to you, right? There is a ledger of that. There is a recording of that. Doesn’t have my name on it, but there’s a recording that would say a transaction took place from wallet number 1, 2, 3, 4 into wallet number 8, 9, 10 or whatever. So you can see, okay, there was a transaction that occurred. So this journalist went and tried to match up and say, Hey, were any of these real transactions? And they weren’t, right? So
Dave:
Basically it all went through the computers, obviously of the professor in his group.
Steve:
So this journalist put him in touch with the FBI, the FBI explained the scam to him a little bit more and said, look, there were not 50 or 60 people in the chat room with you. There was maybe one or two people, maybe probably just one. And I guess there are the FBI identified, oh, well, there are three big criminal syndicates. I don’t even know where they’re located. Or somewhere overseas. I won’t get us any particular country angry at us. But somewhere overseas there’s these three big criminal syndicates, and this is all they do. They sucker people in with this kind of stuff. So the whole story just really amazed me and quite honestly, I asked him if I could tell this story on the podcast and I thought he’d be okay with it because he said, said, look, I will tell this story to anybody I can so that it doesn’t happen to anybody else because he considers himself and I think he is knowing him, a financially sophisticated guy. And this happened, obviously, you can tell probably from me stuttering here, that it, it’s
Dave:
Disturbing. It’s disturbing. And again, it’s more than just money and the money’s big in this case sounds like a half million dollars gone and that’s a huge deal. But it’s also that this happened to you psychologically. There’s a lot going on there. And part of it is the regulation that I think there’s going to be more in the crypto world that you could do things like you do everything else in investing, A lot of protections in investing as all of who are listening crypto world is obviously they could work out something where they were able to control the investment process. So there’s a lot to that. But let’s face it, there are other scams out there that are going to be just as convincing If this podcast saves one person from losing $1 to this stuff, then it was well worth the recording.
Steve:
And I mean, that’s kind of a tangent you bring up there. I mean, that’s why I’ve thought for years that there should be regulated. The SEC should allow regulated investment vehicles such as the Bitcoin, ETF to exist because with any new industry, if there’s a lack of regulation, it’s just the wild west. And that’s, I think anybody in the crypto digital asset community wants there to be regulation to essentially legitimize or put some structure in place because things like this give that entire industry a bad name.
Dave:
Absolutely. It should absolutely be regulated as much as possible and put out there, and this is the reason why I don’t think it’s going anywhere at this point. So this is the reason why
Steve:
I think we’re long beyond the idea that it’s just going to disappear, that all digital assets, cryptocurrency are just going to disappear and go away. I think it will be in some way the future. I don’t know. I’m not going to sit here and make any prediction about Bitcoin or anything else. I don’t know, but I don’t think at this point it’s just going away. Alright, well I hope, like you said Dave, I hope we save one person, $1 somewhere, or hopefully we save ’em a lot more than that.
Dave:
And until then, I just look at all these things I get and say, okay, worst case scenario, I didn’t pay this bill they’re telling me about and I’ll get a late fee. Or I don’t even go close to opening these things. I know when I get anything,
Steve:
But you get the stuff. I mean at our email, it’ll come in, it’ll look super confusing or super convincing where it’ll look exactly like a DocuSign email that you’d normally get. So I’ve found myself on numerous occasions hovering over something going, wait a second, that looks real. So we’ve all got to have our antenna up and just be skeptical of anything you hear like that. And I think one of the things that they often prey on in a lot of these is you can’t tell anybody else. You can’t call up your son, your daughter, your friend, whoever. The sense of urgency is usually the thing that they’re pressing there.
Dave:
Yep.
Steve:
Alright, thanks for tuning in. We will check back with you all again.