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How to Pull Off a Multimillion-Dollar Investment Scam

I was struck today by the story of Steven Zoernack, who suckered 40 investors out of $5.6 million, all while hiding the fact that he had two felony fraud convictions (he appears to have been on probation during the time he was soliciting investors for his new scam) and a bankruptcy as well as money judgments and liens.

As a private investigator, I always wonder to myself, “Why would anyone invest with someone like Zoernack?”

As a natural skeptic, I am always miffed that people will provide their hard-earned money to people like this. Literally 10 minutes of digging around on the Internet would have shown that this guy had some serious issues.

Which got me thinking: If I wanted to make millions by perpetrating a fraud, what would I do?

With just a few minutes of consideration, I was able to come up with a slew of ideas.

I don’t know if Zoernack did all of these things, but after following a number of investment scams over the years, including Mouli Cohen’s, I have come up with the ultimate plan to make millions.

Pick an Investment Strategy That Is Insanely Complicated

The first thing you need is an investment strategy. You don’t want to pick something that people can easily invest in somewhere else. It needs to be complicated. The more complicated the investment strategy, the better.

You might be the only one who understands your investment strategy, but that’s OK. Amazingly, people will invest in things that they have no idea about.

Within reason, of course, the more complicated something is, the more people will think you are absolutely brilliant. But you need to be able to explain the strategy in simplistic terms so that the people you are soliciting have some clue. And you need to have a good story with it. A loophole or “secret” helps too.

Look the Part

This is probably the easiest part. After all, you can’t expect to solicit millions of dollars driving around in an old jalopy and wearing a fake Patek Philippe.

You need the latest-model Mercedes, or better yet, several late-model luxury cars. Armani suits and nice jewelry are an added bonus, but you can even get away with nice-looking track suits. Whatever situation you are in, you’ve got to dress the part. And you are better off overdressing, not underdressing.

You will also need a beautiful companion who loves the life of luxury. Your companion doesn’t need to know what you are up to, but he or she needs to love being showered with gifts, dressing in designer wear and being seen at all the exclusive local events.

Waterfront homes, yachts and large philanthropic contributions don’t hurt either.

Move to the Right Place

Colleagues of mine always joke that every financial scam has some sort of connection to Florida. And this is backed up by real data too. I don’t know what’s in the water, but Floridians are the most susceptible group to fraudsters who I have ever seen. The best example is Bernard Madoff, who had a connection to Palm Beach, where a number of victims invested.  Scott Rothstein, Gary Gauthier and Lou Pearlman come to mind too. Tampa Bay, Jacksonville, Orlando, Miami, Fort Lauderdale and Palm Beach would be good places to start.

Whatever the plan is, don’t do it in your own backyard. Move somewhere new. You will need to take some time to establish yourself and lay the groundwork, and you don’t want anything from your past coming back to haunt you. The best way to do that is to go to a different part of the world.

Besides, people love the new guy in town.

Get in with the Right Crowd

This one’s a bit trickier. There have been a number of successful frauds that prey upon low-income people. But that’s a lot of people who you need to convince. There’s just too much risk of getting caught with all those people.

You can always prey upon members of an identifiable group, such as those in religious and ethnic communities, which is more commonly referred to as an affinity scam. Bernie Madoff preyed on Jewish victims. If you are not part of a strongly identifiable religious or ethnic group, you can always prey on the elderly. They are quite the gullible group.

But the best thing to do is to find a wealthy enclave of people, but preferably not in a big town like New York City. Mid-size towns work best.

And besides, part of the way that fraudsters justify their actions is by saying that their schemes  are victimless crimes. “Nobody dies,” one might say. And rich people don’t need their money. Or so the fraudsters say.

Go to the Most Exclusive Places

In addition to dressing the part and acting the part, you need to be at the right places — the gala events, charity balls and society parties. Make sure that you have your picture taken with the movers and shakers too. You can really leverage a picture with a politician, celebrity or successful businessman. And make sure you prominently display that photo.

Start a Charity

Even if the tide starts to turn against you, you will always have the charity to fall back on. People will say, “Yes, he may be a fraud, but he does all of that great work for charity.” You really don’t have to do all that much for a charity, but you need to make it as real as possible.

Trust me, it works. Literally, every single investment fraud I have ever done research on has some sort of charitable component. I have found that the charity is best when it’s for a group that everyone can relate to, like children or people with cancer. 

Hire a Firm to Manipulate Online Search Results

If you meet someone, what is the first thing you will do?

If you said “Google them,” you are like 94.6 percent of the rest of the population (I just made that number up, but it’s probably pretty accurate).

If it hasn’t happened already, and you don’t have some sort of criminal past, at some point there will be some complaints about you. After all, you will be screwing some people over at some point.

Jack the Ripper once said, “The best place to hide a dead body is page 2 of Google search results.”

So you need to get ahead of the game and hire a firm to manipulate the search results. That’s so that all the stuff that you don’t want people to see gets buried on page 2 of Google.

Release a bunch of fancy-sounding press releases. Register domains with your name to make sure that they show up high on search results. Sign up for every social media profile that you can, using your real name. Make sure you have great pictures of yourself and be sure to update all of these profiles often.

This is so that you can have a beautifully crafted persona at the top of the results, while all the bad stuff gets buried on page 2 of the Google results. After all, as Jack the Ripper once said, “The best place to hide a dead body is page 2 of Google search results.”

Zoernack paid an Internet-based search engine manipulator $10,000 to make negative information about him appear less prominently in search engine results. That’s a drop in the bucket compared to the millions that you will pull in.

Don’t Register Funds with the SEC or Any State Regulators

Why would you ever want to have yourself scrutinized by the SEC or any of the state regulators? Even though you are supposed to do so, they won’t catch on for quite some time. It’s probable that you will eventually get caught, but there is no need to speed up the process. It took them 25+ years to catch up with Madoff. Zoernack wasn’t registered at all and it took the SEC years to finally catch up with him.

Make Things Up That Nobody Can Verify

Zoernack’s employment history, according to LinkedIn, included a bunch of defunct firms like Bear Stearns and Lehman Brothers. Good luck trying to verify that. Mouli Cohen issued multiple press releases claiming that he “was awarded the first-ever ‘Millionaire Residency’ with full citizenship status by President George H. Bush.” Unfortunately for Mr. Cohen, as far as we can tell, there is no such thing as a Millionaire Residency status.

Another good one is fake military service, preferably with some secret special forces unit. It’s probably not a good idea to fake a “normal” military service, as that’s pretty easily verifiable. The best thing to do is to have a history in some secret unit. Therefore, when someone questions it, you can easily say, “Nobody knew who I was. Nobody was allowed to know who I was.” This has worked for many, including Wayne Simmons, who purported to be a former CIA operative.

Create a Fake Work History

The fancier the work history, the better. Most companies will only verify your employment information with a signed release, so you don’t need to worry about someone checking up on it. Just make sure that you can’t verify it through some other means, like regulatory records, historical media or press releases. And if you have a bunch of gaps in your employment history, you can make up stuff to fill them in. Nobody is likely to check anyway.

Fake Your Degree

If you have an Ivy League degree, you get a certain amount of respect. Don’t worry, if you don’t actually have a degree from an Ivy League school, you can just make that up too.

Most schools these days use an outside service called National Student Clearinghouse to verify degree information. And most schools, even if you call them (or even beg them, as I have done many times), will not verify the information any other way.

Why does this matter?

In order verify a degree in the National Student Clearinghouse’s database, which covers most of the schools in the United States, it requires that the student “has applied for or received products, services or employment that depend upon verification of degree and/or enrollment.”

Even if you have a signed release, they won’t verify the information since it doesn’t fit one of those categories. This is despite the fact that FERPA considers degree verification information “directory information” that schools may disclose without consent. It’s totally bogus, but I am not the one making up the rules. 

Nevertheless, make sure you claim to have graduated from a college that will not release degree information through any other way besides the National Student Clearinghouse, since they are the guardian of millions of degree records.

Fake Your Investment Performance

This is pretty obvious. Since you are probably going to be terrible at whatever investment you make (and considering you are probably going to be taking money from investors), you will need to provide some documents that fake your investment performance. It’s preferable if you have some sort of “audited” statements from an accounting firm, but that’s not totally necessary. People tend to believe what they see in any glossy presentation.

But don’t get too greedy. You can’t have some ridiculous investment performance that nobody will believe. You just need to show some strong, consistent returns, especially in a down market.

Don’t Fake Everything

Even with your fake degree, fake work history and fake investment performance, you don’t want to fake your entire life. It’s good to mix in a bit of real life with the fake stuff. You do have to have a little bit of authenticity (just not too much). If your real-life story is completely boring, it’s OK to embellish it a bit. Just make sure you stick with the same story; you don’t want to get caught telling a lie.

Promise Exclusivity

Everyone knows that exclusivity creates demand. A lot of scammers like Madoff have done this. You need to know someone to be part of the exclusive club. Don’t take any new investors unless they are part of this exclusive club. And make sure you talk it up.

“Normally, I don’t do this, but I will allow you to invest; however, you need to invest at least $250,000.”

Or only accept investors who have been vouched for by another investor.

I’ve seen both of these strategies work perfectly before.

Conclusion

One would think that in the information age, it would be easier to avoid these kinds of frauds. But the complete opposite seems to be true. Turns out that more than 12 percent of Ponzi-type schemes were carried out by perpetrators who had a prior history of fraud. That number just boggles my mind.

So how do you avoid all of this?

Of course, you could hire a professional. 

But it turns out that we have written quite a bit about this very topic. Here are a few tips gathered from our blog and around the web to help you out:

Guide to Hiring a Private Investigator

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6 replies
  1. Jeffrey Heakin
    Jeffrey Heakin says:

    I propose an addition to the list:

    “Don’t hire an independent auditor to certify your financial statements”

    Or, alternatively, if you do, hire a little-known firm with no verifiable track record of conducting an impartial third-party audit.

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