How "Phantom Riches" Cost $82,000
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Phantoms lurk in every investment scam. Sometimes they take the form of big payoffs; other times they are the security of "guaranteed" returns. Fraud experts call them "phantom riches"—and they're the most common tactics cons use to rip off investors.
But the criminal is never able to deliver on the promise of riches, because they do not exist. Research funded by the FINRA Investor Education Foundation analyzed hundreds of hours of undercover audiotape to determine the most common persuasion tactics fraudsters used to lure victims.
"The phantom's purpose is to get you to stop thinking logically," said Doug Shadel, the Washington state director of AARP and an expert in financial fraud who led the research team.
"If you want something badly enough, it can really hinder your ability to critically examine an offer," Shadel said. "A key goal of persuasion is to move you out of the logical reasoning part of your mind into the emotional. It's what con artists call putting you under the ether."
Jameson Kauhi of Vancouver, Wash., knows what that ether feels like. He was lured into a scam by a local businessman who promised him millions of dollars in a real estate development investment, but first Kauhi had to pay $82,000 in fees to access that money. All the documents looked good, and the con was a smooth talker.
"He knew how to push my buttons to cause me to give him the money," Kauhi said.
The businessman was eventually convicted. And while Kauhi was awarded damages, he does not expect to collect anything. Learn about the ways to avoid becoming a victim like Jameson.