064 How to Avoid Being Scammed

Hey there, real quick, before we jump into the episode, listen, if your earnings treadmill hasn't set you free yet, running faster won't either. Listen, hustle without principles just going to burn you out. So here's what I want for you. I want you to join me for my money machine experience live. It is three free trainings. Deep dive into how to escape the treadmill and build a money machine that actually works for you. All right, grab your spot here by going to moneymachinelive.com and I'll see you in the free training. How do you avoid being scammed in today's world? Listen, financial scams are $5.8 billion with a B industry, and they could be robbing you blind and you might not even know it. In this episode of the Affluent Entrepreneur show, we're going to talk about the 10 emotional and psychological triggers they use to get to you, to get to your money, and to get to your life. And we're going to give you the tactics and the tools to avoid them so you don't become a victim of a scam like I did. I'll see you in the episode.

This is the Affluent Entrepreneur show for entrepreneurs that want to operate at a high level and achieve financial liberation. I'm your host, Mel Abraham, and I'll be sharing with you what it takes to create success beyond wealth so you can have a richer, more fulfilling lifestyle. In this show, you'll learn how business and money intersect so you can scale your business, scale your money, and scale your life while creating a deeper impact and living with complete freedom, because that's what it really means to be an absolute entrepreneur.

Oh, financial scams. So this episode may be a little different than my normal episodes, but it's important because one of the pillars of the affluence blueprint is the insulate pillar. And we want to insulate you from losses, from theft, from lawsuits, all kinds of different things that we want to insulate you from. And, you know, I thought about this whole episode because I was watching the Netflix advertisements and all the stuff for all the different scams that are going on, all the little documentaries that are going on, whether it's the Tinder swindler or inventing Anna or the whole Theranos situation, there seems to be a proliferation of scams these days. And if we're to find financial freedom, if we're to create wealth, we need to understand how to avoid those scams, how to get past those scams. Now, I get it. I get it. You might be sitting back Right now and saying, mel, no one's gonna get me. Yeah, I had that same attitude in 2004, 2005, and I got into an investment that turned out to be a Ponzi scheme. And before I knew it, I wiped out one third of my net worth. I gave this guy money. I actually kept giving him money. It was horrible. And so I kept giving him money. And in the end, between me and two friends, we lost over four and a half million dollars, and I wiped out one third of my net worth. And watching some of these advertisements and seeing all of these scams coming up, I started to ask myself, you know, has this grown? And how do we get taken by scams? How is a guy like me, who's a financial guy, I'm supposed to know better, but clearly I didn't. How did I get taken? Well, in this episode, I'm going to walk you through the 10 psychological emotional triggers that scammers use. Whether it's a. An online scam, whether it's a romance scam or a financial scam. Well, what do they use? And then I'm going to give you the 10 things that you need to do to keep you safe so you don't get taken. I mean, let's face it.

Fraud is a $5.8 billion.

With a B industry right now. It's up 3.4 from 3.4 billion in 2020, increased more than 70%. Okay. This is what's happening in. In our world today. And I believe, and the reason I think this is an important episode for you to go through the whole thing, and we can give you some tools, and I'm gonna give you some other resources. But.

Is that, I think as we go into uncertain times, as we go into potentially a recession, as we go into higher inflation, as we go into higher interest rates, the amount of scams you're going to see are going to come your way is only going to increase. Their access to you is much greater than it ever was. $770 million.

In social media fraud happened in 2021. $770 million. 70% of social media losses were from either investment scams, romance scams, or online shopping fraud. Okay? And those stats, they say only about 5%, 4.8% of the people that are victimized ever report them to the ftc. Okay, so that means that those stats are probably way underreported. There's probably a whole lot more that are out there that never get reported. And so people are losing their livelihood, people are losing their income, people are Losing their hope because of these things. I watched people in the, in the Ponzi scheme that I got, got hit with, lost their homes. They took their. Took their retirement and gave it to this guy. They lost their future.

We need to be smart. We need to understand the games they play, the ploys they use, and how they get underneath and past our barriers and everything. Because it happened to me, so it can happen to anyone. And the thing that concerns me more than anything else is they're going after the elderly. They're going after folks that don't have the opportunity to recreate themselves, to rebuild, if you will. So I want to walk you through the 10 psychological triggers, get you to understand what they are, how they're going. But let's just do kind of a walk down some of the scammers that you might have seen. Now this guy, I'm going to jump to the iPad. Now this guy you may not know. This is actually the original Charles Ponzi, an Italian swindler. And this is where the Ponzi scheme was named after. But he followed a guy by the name of 520 Miller. He was the original Ponzi scheme. He was promising 10% per week. That's how they got to 520, 520%. Running something called the Franklin Syndicate. You probably saw this person.

In the Netflix show inventing Anna. Anna. Anna Delvey or Anna Sorkin, depending what her name is, who.

Was Cameron. And then this guy, all right, the Tinder swindler, he portrayed himself as some diamond guy and was getting into romance on dating apps with ladies and then borrowing money, putting them into debt, taking their life savings and living high on the hog. And he's out, he's doing his thing. And then most recently is.

Is Elizabeth Holmes with a Theranos. But the most notorious, I think the most popular, I don't want to use the term popular, but the most notorious is probably this guy, Bernie Madoff. Okay, Bernie was the largest, longest running.

Ponzi scheme in history at this stage. And he destroyed a lot of lives. He destroyed a lot of non profits. He stole.

Billions of dollars from folks in the process. And then let me introduce you to the guy that did it to me. This guy by the name of Peter Frommer.

He is the one that took it from me. Now I met. Let me give you a little bit of backstory so you understand how this thing played out. Because I met him through a friend who happened to be investing with him. And he said this, this guy's been great. He's been giving me 21% returns over the next, over every six, six, eight weeks. And so I listened to him. I went and met him at his Malibu estate and saw his family. He had three children and he was a family guy. He came from a family that was hedge fund run, they ran hedge funds. So he came from the financial space and doing investments. So he had a lot of the, the trappings and the, and the makings of, of credibility. And so what did I do? Just so you understand, how did I get caught? We'll talk about the psychological ploys that he used on me in the process, but let's just walk through with that. The 10, the 10 triggers that they use to get you into these games. All right, so the first, the first trigger is this. It's authority, okay? It's authority. This is about, they have credibility, they have titles, they have background. Peter Farmer, in my case, he came from a hedge fund. He was running a hedge fund. He did investments. Bernie Madoff actually was a legitimate guy for a long time running investments and running an investment firm and doing that. So there was authority there that came into play. So they had authority. That's the first trigger. That, and they're not in any order, but that's the first trigger I think that, that we see. And, and here's the thing we need to understand, especially in today's world. You can fabricate anything, you can duplicate websites, logos.

You can create authority or perceived authority, if you will. And so we need to be aware of that. We need to be diligent and vigilant about testing the authority, questioning the authority and making sure that we're verifying. It's unfortunate we have to be that way, but we really need, need to in that process.

The next psychological trigger that you're going to see is something we call forced indebtedness. This is kind of the reciprocity kind of trigger where they do something for you, whether they get you ball game tickets or they do a favor for you and in return you feel some level of indebtedness. Now the interesting thing is many times you never asked for what they did. You may have mentioned something, you may have said something, they may have heard something and they did it. And now the human nature creates this indebtedness to them, this reciprocity, this desire to equal, equalize it if you will. And so watch for forced indebtedness number three.

This one's, this one's a big one. It's FOMO and folo. It's fear of missing out Fear of losing out, fear of a lost opportunity. And they're really good at this. Okay? You talk about scarcity, urgency and, and deadline. Since this is about coming into this, this is. These are psychological emotional triggers. So they're tapping into the emotions of the fear of losing something, the fear of not having something. And what would it be like if you didn't get this? And this is the chance. And now we live in a social media world, and social media is the greatest perpetrator of FOMO out there. Okay, because what are they doing? People are parading their supposed perfect lives on social media.

And what does it do to people?

What does it do to people? Because we're constantly comparing, but we're comparing what is pictured on social media. I got to tell you, let's not pay attention to what. It's not true. Most of it. Some of them are probably in debt. Some of them may be. It may not be real. Maybe it's staged, I don't know. But what they're creating in a comparison society is the feeling of fomo folo. It is the wrong strategy to use to get into an investment. But that happened to me too. So. All right, number four is what we call biases or heuristics. This is again, linking emails, a telephone number, news stories cross, creating an appearance of believability, creating an aura of believability, creating the website, making a, you know, Peter, he created a website, he had a website, he showed me the websites, he walked me through it, he walked through the spreadsheets, he walked through everything. It created an appearance of believability. And the other side of it is that they pray.

In this bias perspective. They prey on your past experiences. They prey on your past experiences. Now you sit back and go, well, how the hell do they know about my past experiences? Guess what? It's all over social media for many people. So if they understand what you did in the past or they understand what you might value and they bring that into.

This conversation that you might be having with them, all of a sudden there's this previous experience that's happening and say, oh, that's like before. And yes, oh, okay. And now you drop your guard. This is all about them getting you to drop your guard. Number five. Number five is all about urgency and scarcity. If you're in marketing, you understand this one tremendously. But, you know, limited time. This investment is closing. Here's a deadline. I'm only have five spots and I have 10 people waiting for them. But if you want to get in I'm going to give you a priority. I'm going to give you priority, okay? All those things to create urgency and scarcity. All they're trying to do is strip away the logical mind to get you in to make an emotional decision to get into something that you think is right, but somewhere deep down, your gut might be telling you it's wrong. And they're bypassing that logic by stirring up the psychological triggers and the emotions. That leads me to number six, and that is about exclusivity. Okay? This is where they tap into the ego and say, this is exclusive. I don't normally let people in, okay? It's a closed group. You want to be with the in crowd. This is what Bernie Madoff did. To be in with Bernie Madoff. Oh, my gosh, all the bigwigs were with Bernie Madoff. I got to get in with Bernie Madoff. Okay? And so then you look at number seven, and this is something that Ponzi schemes really rely on as. As a mechanism to get other people in. Ponzi schemes, pyramid schemes, all of these will. Will do that. So number seven is all about social proof. Okay? Someone else did it. Listen, my buddy was working with Peter. Got money back, got money back. So he was my social proof. I knew him for years, so I trusted him. And he said, oh, my gosh. Oh, my gosh. Oh, my gosh. Yeah, this is great. You got to get in. And. And so using social proof as the. A mechanism to get you to drop your guard, then number eight. Number eight. This one's a big one. We don't think about it very often, but it's a huge one. It's called identity congruence.

What is identity congruence? It's being consistent with decisions that you previously made.

In other words, that I need to be congruent with my prior decisions. Let me give you an example.

I gave Peter money.

And I believed in the investment. I believed him and this. And. And. And so at some point, he asked for more money. Now, I hadn't got money back yet, but he had offered it back, so I thought I could get it back. And so, in consistency with my prior decisions, I gave more money. So did my buddies. So did other people. Identity congruence. If they can get you to make a specific decision, it is easier for them to get you to make the same decision again. Borrow a little bit turns into borrowing a lot. Investing a little bit turns into turns into investing a lot. Beware of intent. Identity congruence. Okay, that leads me to number nine. Number Nine. You might go, what is he talking about? Charm and niceness. This is something, actually I originally learned when I was working, doing work. I was doing defensive tactics teaching for Gavin de Becker's group. Now, Gavin de Becker is a violent psychologist. He wrote a phenomenal book called the Gift of Fear and Protecting the Gift. It's the psychological elements of stalkers and that kind of thing. And it's fascinating. But when he talks about charm and niceness, he said, the mistake we make is that we use it as a descriptor of someone and we should use it as a verb. Why is this person trying to charm me? What is it about them that they're trying to charm me for? And so you will find that most of these scams, especially romance scams, they're charming, they're nice, at least at the beginning and all that. If you watch what happened with the Tinder swindler, you're gonna see that he was loving, he was nice, he was wine and dining. It was this dream. And then he turned and he was. I mean, he was. He was the devil. Okay. Still is, in my opinion. Okay. You don't prey on people. So. So charm and niceness. And Then number. Number 10 is another one that I learned from Gavin de Becker, and that is this force teaming. Force teaming to find commonality between you and. And them. They are looking for a common thread that you can connect on. Peter Frommer connected with me on the martial arts.

That's it. Okay. I had a martial arts studio. He put his kids in the martial arts studio. We started talking all of a sudden, oh, we have a martial arts. I have been studying martial arts. And now what happens is force teaming. The indication of, or force teaming is that they start to talk in terms of we instead of you. So, for instance, you're walking out of a store and you happen to have cat food in your bag, and someone walks up to you and said, oh, we have a cat doing. The reality is we have nothing.

You have the cat, and this person approached. You use the term we, which created a familiarity that didn't exist. Forced teaming is. Is something that they use that is a very subtle, under the surface way to get closer to you and create a familiarity that doesn't exist. Okay, so Those are the 10 triggers that come into play. Let's just look at really quickly.

How many of these 10 did I get caught in with Peter Farmer with the Ponzi scheme? Because when I looked at this, you know, it was eye opening. So bottom line is I got hit with at least Seven. At least seven of them. Authority. For instance, he was a hedge fund trader. Okay? I, I, I looked at it. He worked for a hedge fund company. He, the hedge fund company was still around. He had credibility, forced indebtedness. He brought his kids to train. In fact, we were given his kids private lessons. I had my assistant going to his house and giving his kids private lessons. And so I felt like, oh, yeah, okay, fomo, Folo. You know what he did? I mean, this was genius. He knew I was a cpa. So he said, look, remember now, what he was saying is that you're going to make 21% every six weeks. So I gave him whatever it was, call it 100,000. It was way more than that. And, and so in six weeks, I was going to get 21,000 back. And he said to me, in six weeks, he says, listen.

I can give you the 21,000 back, but if I do, you're going to have to pay taxes on it. Oh, trigger cpa. You're gonna have to pay taxes on it. But if we just roll it into the next cycle, for the next six weeks, you don't have to pay taxes on it. So we rolled it and we rolled it and we rolled it. But he created a fomo, folo kind of scenario for me where I was caught in and I just let it go. Then exclusivity. He used exclusivity. And he says, look, the only reason I don't know you, who, who you are, Mel, and the only reason that I would consider putting you on this list is because of your friend, okay? Your friend.

Said, you know, highly recommends you. I'm not taking you investors. But if you want to be on this list of small, of, of this small list of investors, I can probably fit you in for, for a small amount. So he got me in for a small amount, remember? I, um. Identity congruence. And then he got me in for a bigger amount. Okay, Then if you look at it, social proof. Social proof was because my buddy had been doing it for months, and then I got another buddy in because I was doing it. Okay? So social proof got a number of us in. And charm and nicest. He was a good guy. He seemed like it. He was a family guy. He was doing charity work. All of the things from the outside seemed good. And then forced teaming, you know, common interest in the martial arts. He used, they used the Internet to find out information on you to figure that out. So with that, I got hit with seven, eight of these. I could probably make an argument for all of them were used against me in this, you just need to be able to identify what do you need to do instead of how do you keep yourself safe when they're scammers, what do you need to do? And I'm going to hook you up with a couple of other videos after this too. But let's just talk about the things to protect your financial legacy, the 10 things that you need to have in place. Because when I look at what happened to me, I let some of these go. I did not follow my rules. I didn't do my normal due diligence. I didn't. I didn't talk to the investment source. I didn't listen to the voice in my head. I didn't hear, listen to the feeling in my gut. I was influenced by a friend.

I was blurred, and this is a big one. I was blurred by promise. I was blurred by possibility. What was it going to look like? So how do we make sure it doesn't happen again? Because the Ponzi scheme for me reestablished all the rules and the things that I teach about investing, about money management, wealth creation, to keep my.

My clients and my member and my community safe. Some of it might be construed as ultra conservative, but I'd rather be conservative and wealthy than aggressive and poor. I don't know. You make your choice. All right, so let's look at the 10 things that, that you need to do. And the first is this is to set your investing rules. You need to. My, My dear friend Brendan Burchard says you need to have the map before you go into the. Into the forest. Okay. That's the same thing with investing. You don't set your invest investing rules as you go. You set your rules before you get into any investment and before you get into the investment. You also know your exit. You know exactly what your entry point is, what your exit point is, and what your rules are. And if it violates one of the rules, you're out or you never get in. I ignored my rules. We teach in the affluence blueprint a set of rules for investing. You need to follow the rules. In fact, some of the rules is what do you do with your cash? I'm going to have that in that video hooked up. Here is literally the rules of how to allocate your cash to build wealth. And to do it right, Number two is you gotta do due diligence. You have to do due diligence. You have to do your own due diligence. I don't care if it Came from an investment advisor. Bernie Madoff was an investment advisor, Okay? A crooked one in the end. A thief in the end.

So you can't just blindly follow what your advisors or other people say. You need to. Due diligence. I had an investment advisor that when he brought me investments, I knew that they went through a process before he would bring them to me. But then I had my own process. I would investigate them, I would look at them. I would ask to speak to the vice president. I would do digging. And I used to not do this, but because of the Ponzi scheme, I do this before you invest. Now, if you're investing in ETFs and index funds, there's still due diligence you do, but it's not. It's not some private investment where you don't know who the players are. Okay? And I would suggest to most people, you don't want to go into these private investments, especially at the beginning, because there's too much risk. There's too much. It may be a sliver of your portfolio at some point, but not when you start out. Not when you start out. All right, number three, get direct statements. What does that mean? That means that if you're in an investment, you want the investment company themselves to send you the statements, just like a bank statement. And just like an investment statement, they do not send them to your advisor. And then the advisor sends them to you. They can send a copy to your advisor. That's fine. But one of the things that helped Bernie Madoff perpetrate his scam was that the. All the statements were going through Bernie and then going to the client so he could fabricate, adjust, tweak, do whatever he needed to do to make them look good. But if the statements were going directly to them, they would know. So I want to make sure that I get all my statements directly from any investments, whether I'm in something as mundane as investing through, say, Fidelity, td, Ameritrade, Schwab, or some specific investments like an oil and gas investment that I might have or a real estate investment trust, alternative investments. Those statements come to me directly. Copies will go to my advisors, but I want them coming to me directly. That limits the ability for them to play games. Number four, I want you to have firsthand chats. I don't want you investing on hearsay. That means that you ask your investment advisor if it's appropriate to get you on the phone to have a conversation with the vice president or the president or the higher ups of the company, not the salespeople okay. When I invest in alternative investments of any sort, I want to talk to the people at the investment. I did an oil and gas one a couple of years ago and I talked to the president of the company, talk to the vice president, company. I asked some very, very pointed, direct questions. I asked for more documentation that wasn't in the prospectus I did. And some investments I decided to walk away from. Some investments I decided to go into. But I want you to have firsthand chats. Yeah, it's going to take a little longer, but it's going to keep you safer. Number five, I want you to have an unbiased advisor. Now, this could be your financial advisor or it could be someone else. Most of my clients, they come to me because I'm unbiased. I'm not selling insurance, I'm not selling investments. I'm selling you on your dreams. I'm here to be the, the one that's going to ask some pointed questions, not just to you, but to the people that are trying to put you in these things. I want to be by your side to keep you safe on the pathway to financial freedom. So you want to have an unbiased advisor in place. Number six, big one here. Ignore social media. Ah. You know, over 30% of scams reported started on social media. Watch it on social media. Ignore what they say, ignore the offers, ignore the facades that they're painting that create the fomo and the emotion, you start feeling that it's yanking over. God, I wish I had that. These are the emotions that scammers love to see. Watch it, watch it. Okay, number seven, delay your decision.

When they try to use scarcity, urgency, fomo, delay your decision. I'll do this on any major purchase. I'll get on someone, get on the phone with me, and they say, are you prepared to make an A decision today? And go, nope, I'm here to learn. And if they don't want to have that conversation with me because I said no, then they're never getting my money. I want to delay the emotion. The delay is going to allow you, I mean, delay the decision. That delay is going to allow you to separate the emotions from the logic so you can look at it, so you can speak to your unbiased advisor so you can have those conversations.

We don't make an emotional decision on the spot. 99% of my decisions are delayed decisions. I walk away and I move through it. Okay, so number seven is delayed decision. Number eight, watch out for the payment method. If someone is contacting you and saying, yeah, there's, you know, this, this investment and the only way we do it is through cryptocurrencies or some weird payment method.

What they're doing is once that money's gone, you'll never get it back. So you want to be aware of some unusual payment method that comes in into play. If you pay in, in cryptos, once it's gone, it's gone. Okay? If you pay in cash, once it's gone, it's gone.

So you want to make sure that you understand the payment methods and that it doesn't seem out of line for the what's customary in the industry in these types of investments and everything. That leads me to number nine, remove the emotions. Remember I said as your emotions go up, your financial intellect goes down. We don't make emotional investing decisions. When you make emotional investing decisions or emotional financial decisions in general, they're typically not good. Now I'm not saying not to follow your gut. Emotions and gut are different things, okay? But when you're pulled from the heart into something that is of financial, of nature, this there's a potential for problem. Which is why romance scams are so popular, because it all is around the heart. Okay? So we need to be aware of that. And then number 10, watch the pie in the sky. If they're making promises to you that seem too good to be true, they probably are. You've heard that before. But you know what? Didn't matter to me when I got into the Ponzi scheme. I still went into it, eyes wide open.

And I lost.

So watch the pie in the sky promises. If they do something like that, I want you, if you look at it and say, okay, but you followed the other nine things and did your due diligence, had the direct statements, did your first hand chats, had an unbiased advisor, delayed the decision, all of those things, you're going to be a lot safer now. Is it going to guarantee your safety? No, but it's going to take steps far, further than, than otherwise. Like I said, scams are on the rise. Financial scams, romance scams and online purchasing scams. Protect yourself from it. Your financial future depends on it. Your legacy depends on it. Your wealth depends on it. Your family is depending on it. I've watched people get destroyed by scams. I've watched people have their whole future completely obliterated. And it's sad. It's, it's obviously, I mean, I look at these, these folks as parasites and I don't want them getting into your life. I Hope that this, this helps. Now I've got a couple of videos that I want to hook you up with. One, like I said, is what to do with your cash. This is going to give you the recipe of what to do with your cash. I'm gonna hook that up. I'll put over here. What do you do with your cashes coming in? But then there's a second one. I said I want to give you the idea of what are the biggest mistakes that investors make. So I'm going to hook those two videos up for you right now and you go ahead and watch those to keep you moving forward, keep you safe. Now, if you have any questions, if you have something that comes up or you need help with something, reach out. Dm, send me a message. Okay, I will, I will get back to you by either doing a video or posting a response, something like that. Sometimes I can't. Some people have tried to get me on the phone. I can't do one on ones. I don't do one on ones. I save those for my one on one clients and that's a lot more money. Okay. But I'm here to help you as a community so everyone learns from it. So if you have anything that's going on financially or you need help, business, finance, wealth, hit me up. Let's get it answered. Let's keep you moving forward. Let's see you soar to the path to financial freedom. Until we get a chance to see each other in another episode, another show, or on the road, always, always strive to live a life that outlives you. See you soon. Cheers. Foreign.

Thank you for listening to the affluent entrepreneur show with me, your host, Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the affluent entrepreneur Facebook group now by going to melabraham.com group and I'll see you there.

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