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December 4, 2022

Suspected Fraud Should Always be Questioned

I learned about something today that I feel I could have done something about but didn't, and I want the rest of you to keep my story in mind if you ever run across a similar circumstance.  Several years ago, as my father-in-law began taking over the financial affairs for his aging and ailing father, the question of his father's investments came up.  My FIL holds his finances pretty close to his chest, but he was so excited about this one investment his father had that he was telling me all about it.  You see, they live in a small town.  And in that small town was a private investment firm and loan lender.  This investment firm paid a guaranteed 10% annually on every dollar invested.  I hope that one sentence sends up red flags for everyone reading this.  I asked him if he meant that they'd averaged 10% returns for the last several years, and he said no, it's a flat 10% return.  He then went on about the loans the company did, the rental properties it owned, and how it invested in the stock market, etc. in order to pay these returns.  I had red strobe lights flashing all around my head, and I told him repeatedly it just didn't sound right, that no one can guarantee that kind of return especially not around 2011 to 2012.  But they did, and his dad made $10k a year on his $100k investment. I tried to convince him that it couldn't be legit, but he just refused to believe it.  "The company has been around since 1970.  The guy who ran it had died and it was taken over by one of his workers, a very nice lady who is now in her 60s or so, and she just really knows what she's doing."  

I mean, we all know the end to this story.  I almost reported it to the local authorities, but decided that if I did there was a good chance my FIL would lose his money that had likely already been paid out as "interest" to other investors. I didn't push him on it, and even after he said he was going to invest some more money in it I didn't push him on it because he didn't want to believe me, a kid in his eyes.  Well, for some reason today I was thinking about that company so I searched it on Google and found where the whole damn thing came crashing down in late November/December of 2015.  I'd missed it on the news somehow, but there were articles a plenty about the hundreds of victims who'd fallen for this ponzi scheme in this small town.  Millions have been lost.  Blah. Blah. Blah.  

So I called my wife and we called her parents.  Of course they knew all about it, they'd filed the paperwork with the prosecutors and are part of the lawsuit against the now defunct company.  They were told by the local authorities they could write their entire investment off as a casualty loss on their tax return in 2016 (I don't know anything about that part, that's just something he mentioned on the phone).  Chances of them collecting a dime other than the tax savings they get back are slim.  It's a damn shame, and while I really want to scream "I told you so!" from the rooftops, I also feel guilty as hell because if I'd not let him bully over me and forced him to think about it, maybe they wouldn't have lost what so many others did.  I urge you, if you have family or friends you suspect are unknowingly investing in something so clearly fraudulent, don't let them get away with dismissing your concerns.  Make them understand.  

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