Ben Carlson - Don't Fall For It

Ben Carlson

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Copyright © 2020 by Ben Carlson. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Names: Carlson, Benjamin Patrick, 1981- author.

Title: Don't fall for it : a short history of financial scams / Benjamin

Patrick Carlson.

Description: Hoboken, New Jersey : John Wiley & Sons, Inc., [2020] |

Includes bibliographical references and index.

Identifiers: LCCN 2019032942 (print) | LCCN 2019032943 (ebook) | ISBN

9781119605164 (cloth) | ISBN 9781119605195 (adobe pdf) | ISBN

9781119605188 (epub)

Subjects: LCSH: Swindlers and swindling–Case studies. | Fraud–Case

studies. | Financial crimes--Case studies.

Classification: LCC HV6691 .C375 2020 (print) | LCC HV6691 (ebook) | DDC

364.16/309--dc23

LC record available at https://lccn.loc.gov/2019032942

LC ebook record available at https://lccn.loc.gov/2019032943

1 Cover

2 Introduction Introduction The most instructive, indeed the only method of learning to bear with dignity the vicissitude of fortune, is to recall the catastrophe of others . — Polybius In 2008, a self-employed handyman named Fred Haines was wandering around Wichita’s Dwight D. Eisenhower airport in search of a Nigerian man carrying two chests full of cold hard cash. After asking around and waiting for an hour or so he finally realized the $64 million inheritance he was promised in an email from Nigeria wasn’t walking off an airplane. Over a period from 2005 to 2008, Haines mortgaged his home three times in hopes that forking over six figures of cash would be enough to help him receive a seven-figure inheritance from Africa. It’s hard to believe the Nigerian Prince scam could be so effective but some people just want to believe these things could be true. Haines claims the first email he received did come off as some sort of joke or scam. Nevertheless, he was intrigued as the person on the other end of his correspondence promised Haines he was owed tens of millions of dollars of an inheritance that rightfully belonged to him. The scammers told Haines his money was being moved from country to country but they needed money along the way to grease the wheels of international law that were overseeing the movement of his funds. The scammers said at one point that the money had gone from Nigeria to Egypt to England to New York and once again back to Nigeria. Haines claims to have tried to get back the money after he sent it, but after going so deep down this rabbit hole he had convinced himself it couldn’t be a scam. “It got to the point where they were showing me that the president of Nigeria had sent me a letter. It had his picture on it and everything,” Haines said. “I looked it up on the computer to see what the Nigerian president looked like, and it was him.” Then there was the email he received from Robert Mueller, Director of the FBI at the time, and a man who is now widely known for conducting an investigation of some sort on the 45 th President of the United States. The subject line of this email read:

3 Chapter 1 No One Sells Miracles Goats as Viagra? Radio The Placebo Effect Correlation Does Not Imply Causation Same as It Ever Was Notes

4 Chapter 2 How to Sell Anything The Count Selling the Eiffel Tower Everyone Is in Sales Notes

5 Chapter 3 Fast Money The Promise of Huge Returns with Minimal Effort When Trust Goes too Far Do Your Homework Notes

6 Chapter 4 It’s the End of the World as We Know It Number of People in Extreme Poverty Fell by 137,000 Since Yesterday Notes

7 Chapter 5 Sleight of Hand Bad Brad A Magician Reveals His Secrets Notes

8 Chapter 6 When Success Doesn’t Translate Defeated by Decency Don’t Try to Get Rich Twice Notes

9 Chapter 7 When Fraud Flourishes When There’s an ‘Expert’ with a Good Story When Capital Becomes Blind When the Banking Industry Gets Involved When Individuals Begin Taking Their Cues from the Crowd When Markets Are Rocking When the Opportunity Presents Itself When Human Beings Are Involved When Innovation Runs Rampant Notes

10 Chapter 8 The Siren Song of New Technologies The Railway Napoleon The Media’s Role in a Bubble The Other Side The Silver Lining of a Market Crash Notes

11 Chapter 9 The Seductive Power of FOMO How to Create a Monopoly The Roaring 20s When the Tide Goes Out Not a Ponzi but Close Enough The Seductive Power of FOMO Notes

12 Chapter 10 Type I Charlatan John Law and the Mississippi Company Speculation Is a Hell of a Drug Pop Goes the Bubble Type I and Type II Charlatans Notes

13 Chapter 11 Type II Charlatan The South Sea Company Type II Charlatan John Blunt The Bubble Act The Echo Bubble and Dunbar’s Number Notes

14 Chapter 12 Fooled by Intelligence Newton’s Mania The Problem with Smartest People in the Room Why Smart People Make Dumb Decisions Fooling Yourself with Complexity Notes

15 Chapter 13 How Gullible Are You? Ponzi versus Bernie The Sacred Relationship Notes

16 Chapter 14 The Easiest Person to Fool Getting Rich versus Staying Rich Shot out of a Cannon The Biggest Fraud of All Notes

17 Conclusion: Six Signs of Financial Fraud 1. The Money Manager Has Custody of Your Assets 2. There Is an Aura of Exclusivity in the Pitch 3. When the Strategy Is too Complicated to Understand 4. When the Story Is too Good to Be True 5. When the Returns Are Ridiculously Good 6. When They Tell You Exactly What You Want to Hear Notes