Seasoned Investor Conned by Phony Investment

If It Can Happen to Him...

TASA ID: 2346

A few years ago I met an investor who explained to me that he had a business dispute lawsuit he was preparing to file.  He planned to engage my services to support the litigation. 

During our discussion, he diverted from the subject and began telling me about this wonderful investment he had just gotten into.  This man had been in the business world for over 50 years and was quite successful.  He went on to describe a company that claimed to have developed a computer program that trades commodities each day and produces a profit of 1.25 to 1.75 percent whether the commodity goes up or down.  He continued by telling me that he held a small investment but was planning to invest a substantial sum and, I should join him.

He showed me a one month statement from the company.  It showed daily transactions (opening balances, transaction amounts in totals and closing balances) and at the end of that month showed a 31.65 percent return on investment.  The deal, as he explained, was shared 60% for him and 40% for the company.  I questioned the fund’s claims and he became impatient.  I did not want to have a dispute over this.  To avoid this I asked him to do the following: I circled one day out of that statement and asked him to find out what commodities were traded that particular day that would have achieved the reported gain for that day.  He agreed.  I also asked if he could get his money back and he said he could.  I asked that he do that and see if their check is honored by the bank.  He also agreed to that.  I asked one more thing, that he not put any more money into the fund until the first two had been completed.  He agreed.

After a few days I was in contact with him and asked the status of my request.  He told me they seemed very busy and would get back to him.  A few more days passed and there was no change.  I did not want to get on his nerves; he had a small amount of money at risk and kept his promise not to invest more money.

Approximately three weeks later on a Monday morning he telephoned me and told me the president of the company had been arrested over the weekend.  There was no computer program or any trading.  The company was not approved to trade securities on any exchange.  He was very grateful for my skepticism and disbelief.  He saved a large amount of money that he did not have the time or ability to re-earn. The name of the company was Safevest, LLC.

This all occurred prior to the Madoff scandal.

Conclusion

If a seasoned investor could be conned, imagine how others would fair.  My skepticism flag was raised when he discussed massive and promised returns and a computer program that can seemingly predict the future. 

Piece of Advice

A con artist’s prime goal is to convince someone to abandon their view of reality and place their belief and trust in them.  My client rejected my skeptic view as is common with a victim of fraud.  He had deluded himself with the aid of the con artist.  Displaced trust is a technique of a successful con artist. 

This article discusses issues of general interest and does not give any specific legal or business advice pertaining to any specific circumstances.  Before acting upon any of its information, you should obtain appropriate advice from a lawyer or other qualified professional.

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