The Expert Podcast

Various online scams and Ponzi schemes have been around for centuries, with no signs of slowing down. We investigate hundreds of them on a regular basis, and the creativity of scammers is unlimited. One of the things we notice is a lot of patterns in these scams. For example, today in the Wall Street Journal, they announced something we've seen for years: when interest rates go down, there are more scams. Why is that? Well, when interest rates are high, people have options for investing their money.

If you have a retirement account, let's say you have $800,000 in your IRA or 401k, and you can put it in a CD to make six, seven, or eight percent, that's good money; you can live off that. However, if the interest rates go down and you can only get one percent, you start looking for other options. That's where the Bernie Madoff scam was popular because he was offering high-interest rates. People search for these other options, and scammers prey on that, exploiting the desperation of people who need income from their interest.

They will say, "Hey, we have this great investment. Put your money in, and we'll give you," in this case, one firm was offering 177%. All you have to do is, like in this article, start asking some questions: Where is the money going? Show me receipts. Are you a registered security? There are a lot of basic questions you can ask that will filter out many of these scams right off the bat.

So, what are these scams about? Well, here's another trend. It used to be that scammers were pushing crypto. For the last five or six years, cryptocurrency and Bitcoin were hot topics. People saw it in the news; Bitcoin was up 60, 70 thousand dollars at one point, and it was even under 20 thousand. I remember when Bitcoin was 14 thousand, then it went up to 20 and 30 thousand, and people wanted to get caught up in that "gold rush," as they called it. They put their money into Bitcoin.

A lot of people were not sophisticated about cryptocurrency or digital assets and fell victim to anyone they saw on social media saying, "Hey, give your money to me, and I'll put it in crypto," because most consumers don't know where to put their money in crypto. That was the big scam. Well, now that crypto isn't in as high demand anymore, the trend is shifting.

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The new trend is called "pig butchering." Cybercriminals change tactics and target individuals on social media. The key point here is that the lifespan of scams is getting shorter. Here's what we've observed: back in the 80s and 90s, scams revolved around real estate, specifically leveraged real estate, and that lasted for 20 to 25 years. Then, people started putting money into bonds, which lasted for about 10 to 15 years. After that, it was another kind of real estate, syndication, which lasted for about five or six years. You can see the compression; the lifespan is getting shorter.

Cryptocurrency started gaining attention around 2016 and lasted until maybe 2020 or 2021, roughly four or five years. Now, it's "pig butchering." Something new will emerge in the next couple of years. Scams have to recycle quickly because people find out about them faster, thanks to the internet and social media, where they can look up and learn about scams.

What happens when scammers are caught? Here's an example: the SEC (Securities and Exchange Commission) accused two brothers of using investor money to fund a lavish lifestyle in a $60 million Ponzi scheme. What kind of scam was it? Crypto, of course. This was an older one where they did this back in the day. They lured in 80 people by claiming to operate a crypto bot that would net investors 13.5% monthly. That’s almost tripling your money in a year, with compound interest, so people desperate for money fell for it.

Ponzi schemes, scams, and fraud have been around for a long time and will continue to exist. Make sure that anytime you're putting money in, you do your due diligence on the people involved and the company involved. Ensure they’re licensed, have the proper credentials, and possess a registered security number. Know where your money is at all times. Don’t rely solely on statements and returns issued by the company; ensure that a bank shows your money is safely in a bank account. You should see a bank statement with your money, with zeros after the figure, showing that your money is safe.

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