Older adults have been a frequent target of fraudulent investment schemes. The FBI reports a 74% increase in losses suffered by older fraud victims since 2020.
In 2021, more than 92,000 older victims were swindled by financial scams. They lost at least $1.7 billion. Since many seniors never report their losses, the financial impact of fraud on older adults is probably much larger than the statistics suggest.
Allegations Against Fisher Capital
A lawsuit recently filed by the Commodity Futures Trading Commission (CFTC) alleges that Fisher Capital and its owner, Alexander Spellane, targeted older adults in a fraudulent scheme involving investment in gold and silver coins. The CFTC concluded that the coins were worth far less than investors were led to believe.
According to the CFTC, Fisher Capital made “high-pressure telephonic sales pitches that were permeated with material misrepresentations, misleading half-truths, and deceptive omissions designed to build trust with elderly customers; instill fear about the safety of traditional retirement and savings accounts; and deceive victims into purchasing grossly overpriced precious metals from Fisher Capital.” Fisher Capital denies that it fraudulently targeted older adults.
The CFTC contends that Fisher Capital told investors that it was in the business of “wealth protection,” but was really “a boiler room-type operation orchestrated by Spellane to bilk elderly customers out of their retirement savings.” The firm induced investors to liquidate their retirement accounts and to purchase valuable coins.
The CFTC maintains that the firm vastly inflated the worth of the coins, selling them to investors for two or three times their market value. The CFTC’s complaint alleges that investors lost most of the value of their retirement savings by purchasing precious metals from Fisher Capital.
Investment scammers typically trade on fear. Fisher Capital told older investors that the economy was nearing collapse and that precious metals are a hedge against falling stock market prices. While there may be reason to worry about the economy if Congress does not raise the debt ceiling, investing in overpriced commodities to hedge against a speculative risk is a response based on fear rather than reason.
Sellers of fraudulent crypto investments have also targeted older adults. Retirees who fear they have not saved enough to fund their retirement are told they can “catch up” by investing in cryptocurrency.
Unfortunately, it is difficult to recover any part of lost savings when a crypto purchase turns out to be fraudulent. While coin purchases at least provide victims with a commodity they can resell at a loss, purchasers of bogus cryptocurrencies have nothing.
Scammers typically make contact with older adults by pretending to have dialed a wrong number. They begin a friendly chat, then mention how much money they made by investing in a new cryptocurrency. They suggest a small investment (such as $100) to demonstrate how quickly the currency’s value is increasing. A week later, they show the investor a “crypto wallet” that purports to contain $1,000. They repeat this process a few more times, increasing the amount invested each time. When the total investment is substantial, the scammer and the money disappear.
Protecting Against Investment Scams
The Securities and Exchange Commission has published a guide for seniors who want to protect themselves from investment fraud. The SEC’s advice includes:
- Don’t rely on information provided by a person you don’t know who pitches an investment. Do your own research or ask a knowledgeable family member or friend to check out the investment opportunity.
- Investigate publicly traded stocks on the SEC’s EDGAR database. Publicly traded companies are required to file a wealth of information with the SEC about the company’s financial health and investment risks. Have a friend help if you aren’t familiar with business terminology or common disclosures in SEC filings.
- Work with a professional investment adviser. Don’t base investment decisions solely on something you read on Reddit or other message boards. Never trust advice that you receive during a telephone conversation with someone you don’t know.
- Don’t base investment decisions on fear or greed. A younger person who makes a risky decision has time to recover if an investment that promises a large return loses its value. Older investors should generally be willing to accept smaller returns in exchange for safety.
- Don’t make quick or impulsive decisions. Take time to think about whether a proposed investment is right for you.
- Understand that if an investment sounds too good to be true, it’s probably a scam.
The guide has additional suggestions that older people might want to consider before placing their retirement funds at risk. Perhaps the best advice is this: If you receive an unsolicited call from someone who pressures you to invest your money, hang up.