18. Beware of Fraud

Free earns the most. §16 and §17 covered how to avoid being “legally harvested” by the finance industry. This section covers a more sinister enemy — fraud. The finance industry at least operates within legal frameworks; fraud follows no rules. It can wipe out a lifetime of savings overnight, turn retirement plans to ash, even push someone to the edge of suicide.

Real Case: Retirement Savings Wiped Out

There is a story I still can’t shake — a Taiwanese friend’s relative, all retirement savings drained by a fraud ring. A lifetime of hard work and frugality gone — almost ended in tragedy. In the end the friend in the U.S. stepped in to share living costs.

The cruelty of the case: money taken by fraud is nearly impossible to recover. You can file a police report, go to court, but the fraud ring has long since moved the money where it cannot be traced.

Courts Are Not Debt-Collection Agencies

After the Madoff Ponzi scheme was exposed in the U.S., he was sentenced to 150 years. Many victims asked the court to make Madoff repay them; the judge’s response was, in substance: “This court is a place where justice is executed, not a debt-collection agency. We punish criminals, but we cannot get your money back.” Law can punish the bad; it cannot bring your money back. Once defrauded, you’re defrauded. You bear the cost yourself.

Two Iron Rules of Prevention

The only defense against fraud is prevention, not recovery: Rule one: do not join any investment group. Whatever it calls itself — study group, exchange group, sharing group, reading club — if it’s an unfamiliar group related to investing, do not join. Groups are mixed; you don’t know who is a real investor and who is a planted shill. Their methods are mature: first share seemingly valuable knowledge to earn trust, then direct you to an “internal platform” to operate, or recommend “group-exclusive” investments. Once money goes in, it never comes back. Even well-intentioned investor groups can’t control DM behavior — fraudsters approach you as fellow members. Not joining at all is the safest. Rule two: do not take paid investment education. If someone is really that good at investing, why is he charging tuition? Anyone earning 10%+ annualized on a few million in assets has annual investment income far exceeding tuition — no reason to spend time teaching. Only those who can’t make money in the market need teaching income. The famous case: “stock-market gurus” around 2000 — books, classes, TV appearances — looked glamorous, but their own investment accounts were often losing money. Their real income was book sales and tuition. The tuition you pay could have earned far more in the market. Free earns the most — see §27 for the extended argument.

Key Points

One, the first iron rule of fraud prevention is do not join any investment group. Courts can punish criminals but are not debt collectors — money taken by fraud is nearly unrecoverable; prevention is the only protection. Two, paid investment education is not worth attending — real investment masters earn far more than tuition and have no reason to teach for money. Historical “stock-market gurus” were often losing money in their own accounts.

Three, fraud exploits the gray zone next to the finance industry — disguised as “investment education,” “internal group,” “exclusive platform.” Any “exclusive opportunity” away from public-market instruments (QQQ / 00662 etc.) is almost certainly fraud.

18. Beware of Fraud