CW 457 – Mitchell Zuckoff – How To Spot Bad Deals & The Original Ponzi Scheme with Author & Professor at Boston University

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Hey, welcome to the Creating wealth show. This is episode number 457, and this.

Is your host, Jason Hartman.

Thank you so much for joining me today as we examine, with our guest, Mitchell Zuckoff, we examine Charles Ponzi, a famous guy. You've heard his name, yes, the Ponzi scheme. So this should be an interesting episode as we examine that with him and hopefully you get some ideas as to how you might avoid such a similar fate. Remember good old Bernie Madoff, the crook that he is, says he modeled his Ponzi scheme after the Social Security system. He got the idea from that. So it's interesting as we examine this kind of stuff. Yeah, this is one of the things you've got to be careful of, of course, when you relinquish control of your investments, when you are not a direct investor, when you invest in somebody else's deal, when you invest in a fund, a lot of these later people learn that they are Ponzi schemes. And what happens is even if the early investors who get paid back or paid some returns back, they go back when they bust these Ponzi schemes up, just like they did in the Madoff case, and they have to pay that money back so that they can even it out. It's a very difficult mathematical feat to be able to do that when the authorities bust these Ponzi schemes up and make the early investors pay back the money to the later investors, because that's how a Ponzi scheme works. And you all probably know that. So I don't need to explain that in too much detail. So again, follow commandment number three. And, you know, for your regular listeners, you're probably so sick of hearing me talk about this, you can't even tolerate it anymore. So I apologize. But commandment number three, what is it? Thou shalt maintain control. Don't leave yourself susceptible to the three major problems you encounter when you don't retain control. Number one, you might be investing with a crook, a Ponzi scheme possibly, or some other kinds of crockery. It doesn't have to be a Ponzi scheme. There's lots of ways people take advantage of people and deceive them and steal from them when they invest in a fund. And it doesn't have to be a Ponzi scheme. There are lots of other ways to do that. So Charles Ponzi just was the guy who made one way famous, one way that people get cheated. So you might be investing with a crook. Number two, you might be investing with an idiot. And number three, assuming they're honest and competent, they take a huge management fee off the top for managing the deal. Either way, any of these ways you lose money and that is not good. So we want to be a direct investor. We want to be in control of our investments. And that's the great thing about our system. You decide what to buy, where to buy, when to buy, how to finance it, how to refinance it, how much to rent it for, who to rent it to. You can have control over all of this stuff when to raise the rent. And you don't have someone taking a bunch of expenses off the top, a bunch of so called business expenses. So what happens when that fund that you might have invested in in the past, what happens when they need to raise more money for it or talk with a vendor and do they go out to an expensive dinner and does the fund pay for that? Do they travel somewhere to go to a conference? Of course, first class all the way. And does the fund pay for that? Well, that's your money folks, financing all of that. And it just becomes abusive. So being a direct investor is really the ultimate way to do it. So stay away from that Wall street stuff. Stay away from these other deals that cause you and force you to relinquish control. I am talking to you today from Beautiful, beautiful. And I haven't been here in years. Beautiful Sedona Arizon mom came in on Christmas Eve. I picked her up at the airport. And then we went to candlelight services at a church in Phoenix. And it was just a beautiful time. It was interesting. The sermon talked about light. And it was very interesting how he mixed the concept of theology and science in this sermon and talked about the speed of light, which you probably know it's about 180, 26,000 miles per second. So that means light can travel around the Earth over seven times in less than a second. Isn't that amazing how fast it is? But there is one thing on Earth that slows light down dramatically. And I did not know this. And what it does is it basically cuts the speed of light in less than half to where it's only going a mere 77,000 miles per second. And what is that substance? Well, it is a diamond. Because of the complex carbon makeup of a diamond, it really, really has the effect of slowing down the speed of light. And I thought this was really interesting because that's what makes a diamond sparkle so much. So I just thought I'd kind of share that with you. So, anyway, a little bit more of what we did here, and then that was Christmas Eve. Beautiful candlelight service. Really, really awesome. And then Christmas Day, we drove to Sedona, Arizona, and this place, I just. I haven't been here in years, and I just forgot how strikingly beautiful it is. And, you know, they say there are all these energy vortexes here, and we're going to go visit one in just a little bit. And this morning we got up and we took a helicopter tour. And by the way, got that for free. Would have paid for it, but got it offered for free.

So guess what we have to do.

Next to earn that free helicopter ride? Well, mom and I, you probably are going to guess what I'm going to say here. Mom and I have to go to a timeshare presentation. Yes, I know, I know. A timeshare presentation. And that's interesting. You know, a timeshare is probably the worst investment in real estate. You know, assuming you're not investing in a fund or anyone else's deal or a REIT or something like that. A timeshare is commonly thought of as the worst real estate investment going. So we'll see what this is. But I always learn a lot. I've been to one of these. Many years ago, I went to one of these timeshare presentations, and, you know, they've got their incredibly good sales techniques. I hope I can resist. You know, you'll know if I tell you I bought a timeshare on the next episode that I wasn't able to resist. I was persuaded into it. So, anyway, I'll let you know how that goes. And then we're off to the Grand Canyon. So mom has not been to either of these places in several years, and I wanted to have her see them again. So that's what we're doing. So I hope you had a very merry Christmas and I wish you a fantastic new year as you're probably planning for the new year now, maybe you're setting some goals. Maybe you want to acquire more properties. Maybe you want to get into the paper side of the real estate business. And at our upcoming Meet the Masters event, we're going to talk a lot about the paper side of the real estate business. What do I mean by the paper side? Well, the paper is the financing of deals. It's the hard money lending, the private lending where you can earn fantastic returns on your money. In the lending side of the business business, it's buying discounted notes and land contracts. So that's the paper side of the business, too. The returns aren't as high with the paper and the paper doesn't have tax advantages like the actual property does. So I have to say that I like the property best. Owning the actual physical asset is my favorite because you can participate in appreciation and tax benefits and leverage and all sorts of cool things like that. However, my second favorite is the paper side of the business. And if you're an investor who doesn't want to deal with management and you just want to basically keep track of your loans and keep track of the financing deals you've done and the returns on your paper investments, you can do very well. It's pretty awesome. And we're going to be presenting on that at the upcoming Meet the Masters event and talk about that, talk about land contracts, talk about a bunch of creative things. This is going to be the most creative and innovative Meet the Masters event we have ever had. And this is our 16th one. I'm pretty sure I'm counting right. We used to do it twice a year. Now we only do it once a year because it's a pretty hard event to put on with getting all these speakers to fly in from all over the country, different areas of expertise, assembling them. So we wanted to reduce our workload a little bit and just do it once a year. So I think this is our 16th. This is the 16th time I've done the Meet the Masters event and it's going to be the best of all of them. Suite 16, we'll call it. How's that sound? Anyway, let's get to our guest today. Make sure you go to jasonhartman.com, check out some of the awesome properties we've got there. And of course, we're going to be presenting some new markets at Meet the Masters as well. And we've sort of been really focusing on the seven markets that are in the properties section at jasonhartman.com for a while. And they've been great and they're still good. I mean, these are still good markets. One thing I do want to say is one of my long term favorite markets that I've really liked is Houston. And I want to just issue a bit of a caution. It's not a huge one, but it's a yellow light, if you will, to be careful if you own in Houston because oil prices have obviously plummeted and that's a deflationary factor. We'll kind of see what that means to the overall economy and it's something we'll be examining at Meet the Masters. But oil prices are down. I just yesterday on our way to Sedona got gas and it was only $2.10 a gallon. I mean, that is, that's pretty cheap now, remember? And you know, pardon me if I don't get these numbers exactly right, but I'm pretty sure I've got this down. When Obama was elected, gas was $1.89 a gallon. So we are almost back to that price, which is pretty amazing. It's interesting also that airfare hasn't really gotten much cheaper. I've noticed that. And I thought that's kind of ridiculous. But yeah, we'll be talking about oil prices and obviously monetary policy, inflation, deflation, stagnation, and the best game plan for all three of those scenarios. The what I'm calling to sort of borrow from Ray Dalio, I'm calling the All Weather Portfolio for all Seasons. And we'll talk about all that at Meet the Masters. But yeah, check out the properties@jasonhartman.com our main seven markets are up there. If you have property in Houston, don't be too aggressive on rent increases right now. If you've got, you know, something coming up for a lease, try and keep your tenant there. Maybe you want to do very minor rent increase of just, you know, 2%, 3% at the most. Maybe, maybe you don't want to be as aggressive now. Of course, that depends where your rent is now. So if you have a below market rent now, then you can be more aggressive. If you have a high rent and you might even be above market, you want to be cautious and really try to renew leases and not be aggressive. And this is one of the things we are always monitoring for you in these different markets as to what the game plan should be based on. Things so the oil prices are something to be aware of. Houston has a diversified economy. It has a lot of medical there. And that industry's been pretty stable in terms of employment and so forth. But the oil industry, you know, that's a big part of the Houston economy. So be a little careful. By the way, I should mention something else on that before we get to our guest today. You know me, I get off on these tangents, but this is important, too. We have been pitched extensively on North Dakota and the oil sands areas there. And these what we'll call man camps where the oil workers are, you know, just inundating those places. Right. And now I am, you know, I'm pretty cautious about things. Many people have called me very risk averse. And, you know, that's just a sign of maturity maybe, or, you know, an age. I just don't like losing money anymore. You know, I know it's hard to earn it back. So I'm pretty cautious about things. And I was pretty cautious about the North Dakota thing because, you know, that economy is not diversified at all. Okay. And we didn't do it. We didn't start recommending that. We've been pitched extensively by a couple of different property vendors up there. And I'm thinking maybe we made the right decision by not doing that, at least not yet. And so we'll see where that goes. Some of our competitors just went in there with wild abandon, and I have a feeling their clients are going to get hurt. Okay. So sometimes just not doing something is the best decision. Usually there's wisdom in action, and you've heard me talk about that extensively on prior episodes. But sometimes the best action is to take no action. And that's exactly what we did in North Dakota and that's exactly what we've done internationally. And I think we made the right decisions on those. So I'm giving myself a little pat on the back here as I'm looking at these beautiful rock formations in Sedona. And I'm next to a waterfall. And so I will go ahead and sign out. Let's get to our guests. Let's talk about Charles Ponzi and we'll do that and be back to talk to you again on the next episode as well. So here's our guest and let's talk about the Ponzi scheme and how it all works.

It's my pleasure to welcome Mitchell Zuckoff to the show. He is a professor of journalism at Boston University. He's the author of the new book 13 the Inside Account of what really Happened in Benghazi. And he's the author of several other books. We had one of his collaborators for the 13 hours, the Benghazi book on the show before. So I really want to focus on one of his works because we've never done a show on the man who originated the Ponzi scheme, and that was Charles Ponzi. So that book is entitled Ponzi's the True Story of a Financial Legend. And Mitchell, welcome. How are you?

I'm well, Jason. Thanks for having me on.

Good, good. It's good to have you. And a lot of people refer to Charles Ponzi, but they don't, you know, and Ponzi schemes, but they don't talk about, you know, his own life and his own kind of biography. If you will tell us about the book.

Sure. You know, it's funny, I like the way you opened because that's exactly how I was before I got involved in that book. I had heard of Ponzi schemes. I was actually a financial reporter for the Boston Globe and I just thought it was maybe an Italian word for swindle. And I didn't realize there was actually a Charles Ponzi. There was a guy. And so I just started researching and found out of all things, he had actually operated. The scheme was based here in Boston where I am. And the book really tells the story of a remarkably charismatic, self deluding guy. He was as much a victim as he was the swindler. And it tells how the scheme that ultimately, obviously we know from Bernie Madoff and from others originated here in Boston in 1919 and 1920 with this bantamweight Italian immigrant who had a smile, you know, as wide as the street, and how he came to personify this particular swindle.

Well, that's interesting. And I want to ask you about why you say he was a victim, because that's a, that's a fascinating take on it, but also just a comment on con artists in general. They're always the nicest people, aren't they? They're always charismatic because that's their stock and trade. I remember, I remember when a former friend of mine conned me several years ago and, you know, he was like the nicest guy. Everybody loved this guy and, you know, just very charismatic. And, you know, I think it boils down to, and Stephen Covey really put it well, I think it was in his 7 Habits of Highly Effective People book where he talked about the personality ethic and the character ethic and how we both have these two ethics inside of us. And the personality ethic, you Know, it opens doors, but the character ethic, it keeps the door open. And Covey didn't say it that way. I'm saying it that way. But, yeah, Ponzi, I mean, I'm sure he was probably a very charismatic, very likable guy. Bernie Madoff was probably that way, too. And heck, the Social Security system, that's where Madoff said he got his idea.

It's interesting, I like the association with both that there can often be a conflict between a person's personality and his true character. And the personality can be inviting and appealing, and yet the character can be rotten underneath. I think, you know, we've seen that with a lot of people, and I think that is the core of a lot of great swindles and even not so great swindles. Maybe like your friend, you know, the swindler has to get over our fear that this is too good to be true. That's the key to every swindle. There's something in all of our minds that says, wait a second. So he has to. Or she, if it's a female swindler, has to convince you somehow by behavior, by attitude, whatever it is, that this is too good to miss. So too good to miss has to trump too good to be true. And usually there's either what we call an affinity that you have, a personal affinity for this person, or you maybe go to the same church, or you are the same ethnic group or the same racial. You have some reason that convinces you to trust this person that ultimately does. As you said, Jason comes down to their nature, the outer personality that they're showing.

So tell us about Charles Ponzi. I mean, sure. How did he think of. Did he. Even though, you know, maybe he just got credit and the whole idea is named after him. But you know, what years was poncey alive.

He was born in 1883 and lived in 1940.

Okay, so certainly then. And the reason I ask you that, just before you go on. There were Ponzi schemes before him.

Exactly.

He's the one who gave it the name. But certainly there was the idea of the, you know, the gold exchanges where you come and deposit your gold and then they would give you a receipt for your gold. Basically how the US Dollar kind of works or used to work. Now they don't even pretend it's backed by gold. It's just pure fiat money. And that was a Ponzi scheme. It turned into a Ponzi scheme. How did it become named after Charles Ponzi?

Sure. Well, as you say, these used to be often categorized as robbing Peter to pay Paul. Where an early investor would be swindled out of his money, his money would be used to pay later investors, or a later investor would be used to pay earlier investors. And as long as the money keeps coming in, that's the nature of a Ponzi scheme. When the ball stops rolling is when it all collapses. So certainly these go back centuries and centuries. But what made Ponzi special was that he did it on a scale that no one had quite seen and with a certain panache that no one had seen before at a particular moment in time. So he was an immigrant. He was an immigrant from Italy. His parents were sort of rich in name, but not in anything else. And he was a bit of a gadfly, a gadabout at the University of Rome, and kind of ran through his money. His father died, and so his parents, his mother and his uncles put him on a boat to America, promising that, as so many immigrants thought, the streets would be paved with gold. And, of course, when he arrived, it wasn't anything of the sort. He arrived actually here in Boston in 1903. The streets were paved with mud, as you'd imagine. And so he went on a journey. He went up and down the east coast trying to make his fortune, trying to make his way in the world. And he got into trouble in Montreal and actually spent a few years in prison, not really because of his own fault. He actually was working for a guy who was a swindler. But I'm maybe being too empathetic and too sympathetic. He created a lot of his own problems along the way. But eventually, he washes up back in Boston in 1916, and he falls in love with a beautiful young Italian American woman named Rose Ganeko. And Rose inspires him. Rose, all she wants is a family, is a nice home to raise a few kids. But he convinces himself that he has to drape her in pearls and wrap her in furs. And so he starts to do whatever he can to grow rich. And you have to remember the time here, you know, the Great War is just about to be over. The stock market is heating up. It's a time when immigrants believe that, okay, finally, we're going to get our share of the pie. And so he feeds into all this, and all this is feeding into him as well. And one of his ideas is to start basically an import export advertising newspaper. And he's going to launch it. It's going to be called the Trader's Guide, to reach out to people in Europe who are doing business in America. And it's kind of a great idea and it's sort of a precursor of a lot of great publications that imagine that market. But he really doesn't have any capital to get it off the ground. He goes to local banks and they pretty much throw him out because he has nothing to offer. And so what he does is he rents an office and he's trying to figure out the next idea when he opens a letter from someone he was corresponding with in Italy about this idea of a trader's guide and out flutters a postal reply coupon. It's a very archaic form of international currency. And what it was, was there was a postal union. It was basically a, an agreement among many countries to respect each other's stamps so mail could move between countries. So you could, if you had one of these little coupons, you could buy a first class stamp in any country in the world. And Ponzi realized that they were sold at a fixed rate. And if you bought this at the same fixed rate based in Europe, where after the war the currencies were depressed, you could at least theoretically sell it for many, many times that amount in dollars. If you could somehow create this arbitrage idea, you could turn this into cash worth 100 times its paid for value in Albania or Italy. And he realizes if he can accumulate enough of these, then turn them into stamps or turn them into cash here in America, he could double, triple, quadruple or go on from there, his money in no time. But again, he still doesn't have any capital to go out and buy these things. So he starts raising money basically on a promissory offer. He offers people double your money in 90 days or 50.

And what year is this?

This is 1919.

Okay, 1919. So it's, it's four years after the Federal Reserve was created. It's after World War I, it's before the Roaring Twenties. So just for some context there, it's kind of interesting. And how much does he raise? Like, you know, what do you do, you know the numbers?

Like the first month he raises about.

$1,000, which, you know, adjusted for inflation, that's like, I don't know, probably $90,000 today. But I'll do the math for you while you're talking. Go ahead.

That's correct.

It's almost 100 to 1. Exactly. From there it snowballs. And in a matter of months, by June, he's raising a million dollars a week. This is unimaginable amounts of money for people. For most People, obviously, if you're not a Rockefeller in 1919 into 1920 and for the longest time, for these first few months, he still is convinced, I'm sure of it, because of a lot of behaviors that otherwise would be much different. If he thought it was a swindle to begin with, he convinced himself he was self deluding. He was sure that it was not going to be the kind of thing where he took the money and ran. And one piece of evidence for that is that in the midst of this, he brings his mother, his elderly mother, over to the United States from Italy and installs her in the house that he buys for himself and for Rose in Lexington, Massachusetts. Now if you're running a take the money and run scheme and you literallyi'm not making this up, he would have a million dollar check in his pocket, a cashier's check in his pocket. It was almost a form of advertising. You don't install your 70 something year old mother to slow you down. He was sure he could make this work, but of course it was logistically impossible. I calculated the number of these reply coupons he would have needed to turn even a fraction of this money into a double or triple. Your money operation would have filled, I forget the number, some number of the holds of 10 or 12 ships. The entire. There simply weren't that many in circulation.

Amazing, amazing. By the way, I calculated the inflation. Now unfortunately, the only inflation calculator I have handy calculates based on the consumer price index, which is of course understated, or at least it certainly has been for the past few decades, pretty dramatically. So $1,000 in 1919 has the same buying power as $13,724.45 in 2014. 14. Okay, so, so that's kind of interesting. And when you said, it's like, you know, that, that basically the dollars lost about 96 of its value most people say since the Federal Reserve was created in 1915. And so, you know, it's depends which way you do the math as to how you think of it. But, but that's interesting. And what, you know, what did Ponzi. Okay, so, so you seem to have some real kind of compassion or empathy for the guy, which most people would hate him. But it looks pretty clear to you that by bringing his mom over and so forth that he wasn't really, or at least he didn't think he was a con man.

Right.

That's right.

Interesting.

I don't for a second excuse his behavior and certainly his investors suffered and people were hurt and People lost their livelihoods. But. But I think he is categorically different than a Bernie Madoff who, by all my reading and by all my understanding, Bernie Madoff was more sociopathic in the idea that he did not care what he was doing. He didn't care who he hurt or whose lives he destroyed. And Ponzi was certainly guilty of taking money under false pretenses, and he hurt a lot of people, but he didn't set out to do so. And so maybe I have a modicum of sympathy for him as a result.

Okay, all right.

Well, that's an honest answer, and I see that. Okay, so how much money did he ultimately raise, and how did he raise it? Was it simply networking? Did he give speeches? You know, that was before the securities act of 1933. You know, I can't believe how slow the law changes. It took until 2013 for that to actually change with crowdfunding, which is mind boggling, frankly. But, you know, what was his technique?

It was mostly word of mouth, Jason. Everyone wanted to get in on this as soon as they heard that he was actually paying out the monies that he promised. And it went six months before there was a story in the newspaper about him. But once that hit in the Boston Post In June of 1919, it exploded intoand I don't have a final count, it's impossible, but it was at $10 million. It was it 12? Was it $14 million? Somewhere in that range, you know, extraordinary sums, considering it was just people coming up and throwing cash through a window in an office building in Boston. And then he started opening branches. It just was a classic case of almost like a tulip mania in Boston at the time. This is why his name gets associated with it, because it became. Everyone was talking everyone's names. His name was on everyone's lips.

Amazing. And was it pretty localized to the Boston area, or was he just spreading?

The New York Times started writing about him, and people started opening up branches for him up and down the east coast when things came to a crashing halt. He was about to open a Texas branch, and he was going to, you know, it was about to take over the world.

Hmm.

Yeah. Fascinating. Wow. Okay, so did you have the number on how much he ultimately raised?

Well, I think I may have mentioned it's hard to give you an exact number, and I like to be precise, but it was well north of 10 million.

Wow. In 1919 or probably into the twenties. How long did his scheme last?

Only seven months. So it was.

Whoa.

It was that quick.

Yeah, it was it burned out fast, but it was fun while it lasted. For him at least.

Well, yeah, yeah, it sure was. Boy, that's a, that's mind boggling. So, you know, one of the things I'd like to ask you is, Mitchell, is there anything our listeners can learn about, you know, how to spot a Ponzi scheme scheme today from Charles Ponzi or the more contemporary people like Bernie Madoff or the US Government and its Social Security system? Do you like how I throw that in all that?

I do. I'm not going to go with you on that show. We can talk.

Well, that's where Madoff said he got the idea, so I'm just quoting him. Fair enough.

I think there are a number of ways. The Federal Trade Commission, I urge people to go to their anti fraud site where they have a lot of cautionary recommendations about Ponzi schemes. Some of it is simply your gut. If it sounds too good to be true, almost certainly it is.

Well, but wouldn't the promoter be smart enough to temper the returns and make them intentionally lower and maybe temper the pitch? So it's kind of better than anything else out there, but not incredible? So it doesn't sound too good to be true.

You've really put your finger on it, Jason, because that's exactly what Madoff did. It wasn't that his returns promised to his investors were exorbitant, they were metronomic. They were like a metronome. They were steady. You didn't have to worry. If this S and P index went up and down, Bernie Madoff would still return 10 or 12% to you every year. So it wasn't this double your money kind of craziness because his investors were too sophisticated. But if Bernie Madoff or anyone else is promising you that no matter what happens, I can give you 10 or 12%, you really need to investigate how is this possible? Why don't the laws of financial gravity apply to this guy?

Right, right. It's just amazing to me the number of people, people that still get conned. And I want to ask you about Nigerian letters for in a moment, but, you know, nothing is kept a secret very well in today's very, very interconnected world of, you know, lightning speed communications globally. I mean, if, if, if one guy can do something like Madoff, why can't everybody do that? You know, why can't every institutional fund return what Madoff could return? I mean, you know, it's not that he had some great secret and, you know, JP Morgan didn't know about it or you know, Fidelity or, you know, Vanguard Funds didn't know what Madoff knew. I mean, that seems silly to me that if you look closely, don't get it.

Every special sauce is really just mayonnaise mixed with relish. You know, there really isn't something that is so special as. You know, you make a great point that there isn't something that.

Right.

That Bernie Madoff in his back room is figuring out that JP Morgan couldn't possibly match. You're right.

Yeah. It's amazing. Well, okay, so adjusted for inflation, once again, the $10 million in 1919, that in that seven months Charles Ponson Ponzi ran his scheme would be worth $137,244,508.67 today, according to the official. Official inflation, you know, stats. So that was quite a lot of money in 1919. So what happened to Charles Ponzi? I mean, he.

Did he get arrested or what?

Yeah, these.

These stories, and I'd love for readers to find it themselves, but, but I will say that these stories, they don't end well. He certainly was ultimately arrested. He was tried. He got out for a while and ran a little. You know, things turned for him, and then he absolutely did run a land swindle down in Florida where if you like really, really moist land, he had something to sell you. But ultimately he ends up in prison, and then finally he's deported back to Italy and ends up dying a pauper in Buenos Aires.

Wow, that's very interesting. So before you go, I'd just like to ask you about the scheme that I cannot believe people actually fall for. It Is that email. We've all seen it and we've probably gotten it several times that someone wants to take a bunch of money out of Nigeria. Nigeria that maybe they inherited or, you know, they're some banker leaving the country or. I don't even know what the scheme is anymore. And people, you know, but I need $10,000 to move the money out of the country, and I'll split the. I'll split the whole thing with you. I mean, really, seriously, people believe this.

On a regular basis. They believe this. And it's all, you know, it only takes one or two. If they send out these little computer shops in Lagos, Nigeria, where many of them originate. If they send out 5,000 or 10,000 or 100,000 of these and one or two people agree to send them just enough money to get them started, or good faith money, and this is how they suck them in, it seems to be worth Their while because they keep doing it. I mean, if it wasn't working, they'd stop doing it or they do something differently. So I ended up writing a story, I guess, sort of an outgrowth of my Ponzi work. I wrote a story about a psychotherapist here in Massachusetts who had himself developed a tool that was supposed to determine people's motives. How ironic is that? Who was swept up in one of these schemes and ultimately was prosecuted by the federal government for having basically become a tool of the Nigerians, the schemers, and defrauding two local banks.

Oh, so what did he do? Borrow money from the banks or get the banks to invest in the deal?

He deposited checks that were from these, that were clearly forged checks on behalf of these Nigerian schemers.

But they would have to know his intent was bad, right?

Well, they didn't focus that much on.

His intent because I would look at.

Him as a victim.

I certainly did up to a point where there was a point where, you know, I started to wonder, did he think the only way to get his money back, even if he had some suspicions, I think he was trying to get his own money back. And when they offered him these checks to deposit, I think he saw that as a way out. And in his desperation, he took these actions that ultimately were check fraud and were bank fraud.

Yeah, very interesting. Very interesting stuff. So what can we do to avoid schemes like that? I mean, it seems so obvious, but apparently a lot of people fall for it. Right?

Well, if you get any email offering that you won a lottery that you didn't enter or you won a prize, or someone unknown to you offers you any kind of inducement, specifically money, please hit delete. Because if you feel like you really missed your big chance, get in touch with me and I will tell you why you didn't. Well, you missed your chance to get swindled is the only thing you missed.

Yeah, speaking of online schemes, there are many of them, but just a couple to mention that aren't as egregious as the Nigerian scheme, or I should say as far fetched. But you know, certainly people will want to buy something from you on Craigslist. They'll send you a fake cashier's check and say, you know, the check is made out for $1,000 but the item's only 800, so will you send me 200 back? So, you know, then you deposit the check, learn it's fake and that doesn't work. And you know, there's lots of interesting stuff like this out there. It's pretty scary that people fall for these things.

I agree. And the problem is the schemers are always trying to stay one step ahead. And. But again, your mother's taught you this. You can't get something for nothing. And if it sounds too good to be true. And all those things really, they're cliches because they happen to be true.

Yeah, right, right. And it seems like the people that would fall for like the Nigerian scheme are elderly. I would think elderly people would really get the brunt of these schemes. They don't really always know how the Internet works or understand that people are fake on the Internet.

I agree with you.

I think you really touched on something there, Jason. If they have my email address, they must know who I am. Sadly, people who are not digital natives, like somebody born before 1960 who's on the Internet. Well, they have my address. Well, yeah. And they're especially vulnerable. And I think again, there have been a number of cases where it's really tragic how much these people have lost.

Yeah, yeah, it certainly is. It certainly is. Well, Mitchell, give out your website or your Twitter handle or whatever you like and let people know where they can find out about your work.

Thanks. It's MitchellZukhoff.com www.mitch e l l z u s ckoff.com and I am on Twitteritchell. Zukoff.

Mitchell, thank you so much for joining us today.

Thanks.

This was a lot of fun. Jason.

I've never really thought of Jason as subversive, but I just found out that's what Wall street considers him to be.

Really? Now how is that possible at all?

Simple. Wall street believes that real estate investors are dangerous to their schemes because the dirty truth about income property is that it actually works in real life.

I know. I mean, how many people do you know, not including insiders who created wealth with stocks, bonds and mutual funds? Those options are for people who only want to pretend they're getting ahead.

Stocks and other non direct traded assets are a losing game. For most people. The typical scenario is you make a little, you lose a little and spin your wheels for decades.

That's because the corporate crooks running the stock and bond investing game will always see to it that they win. This means unless you're one of them, you will not win.

And unluckily for Wall Street, Jason has a unique ability to make the everyday person understand investing the way it should be. He shows them a world where anything less than a 26% annual return is disappointing.

Yep. And that's why Jason offers a one book set on creating wealth that comes with 20 digital download audios. He shows us how we can be excited about these scary times and exploit the incredible opportunities this present economy has afforded us.

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Want to be able to sit back and collect checks every month just like a banker. Jason's Creating Wealth Encyclopedia series is for. This show is produced by The Hartman Media Co. All rights reserved. For distribution or publication rights and media interviews, please visit www.hartmanmedia.com or email mediaartmanmedia.com Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Platinum Properties Investor Network, Inc. Exclusively.