LDS Freedom Forum

TOP TEN WAYS TO AVOID LOSING MONEY IN A FINANCIAL SCAM

Every week Utah residents lose money by investing with friends, family or neighbors – people they knew and trusted. Investment fraud is a big problem here in Utah, largely because our close-knit communities are a prime target for “affinity fraud.” Our state has a long history of financial scams and Ponzi schemes, many of which have been perpetrated by members of the LDS church on members of their ward or stake. It’s heartbreaking.

I have seen people who borrowed money against their homes or liquidated retirement accounts in order to fund risky investments based on pitch by someone they trusted. Unfortunately by the time they call me, the money is long gone – and so is the person who took the money. Because I specialize in helping people recover losses in investment fraud cases I often get asked for advice on how to avoid needing me. So, at the risk of all my work drying up, here is my TOP TEN ways to avoid investing in a financial scam:

10. Slow down. Many people invest after only hearing the pitch; watch out for promoters who try to commit you on the spot. Don’t do it! Take your time, do your research, ask lots of questions, search the internet, review their financials, visit the company, kick the tires before you buy. Be very wary of aggressive sales pitches and deadlines. Ask the hard questions before you hand over your money, not after.

9. Do your homework. Run a simple Google search on the company and its managers, or the individual. If it involves a company, ask for a private placement memorandum and company financials. Hire an attorney to evaluate the investment and help you perform due diligence. Attorneys have access to court databases to look for lawsuits and bankruptcies. Contact federal and state securities regulators see if actions have previously been taken against the company or individuals involved.

8. Hire an attorney. Attorneys can be expensive, but it is much cheaper to hire an attorney to document the transaction properly on the front end than to sue the bad guys when it all blows up. A good lawyer can help you perform due diligence on the company and individuals, and can determine whether the investment is properly structured as a private offering and complies with state and federal statutes. Your lawyer can review the offering materials and help you understand what the risks are. Hiring a good attorney up front is an investment in your investment.

7. Get it in writing. I am amazed how often people will give hundreds of thousands of dollars to someone on nothing more than a handshake. Don’t do it! If things go bad later, proper documentation will be critical to me in my efforts to get your money back. The terms of your deal should always be put in writing, and those terms should be reviewed by the competent attorney you hired. (See number 8.) In any private investment opportunity you should receive a detailed lengthy disclosure document called a private placement memorandum (PPM). Take the time to review it before you invest. It contains detailed information about all aspects of the business including the business model, financial history, risk factors, biographical information on the managers, civil lawsuits, and the terms and conditions of the investment, among other things. If the company soliciting your money has not prepared a PPM, that should be the end of your discussions with them.

6. Beware of guarantees. If anyone tells you that your investment is “guaranteed” that should cause some you concern. All investments carry risk, and personal guarantees (especially oral ones) are rarely a means to get your money back. Even if you are approached to loan money and get a promissory note that is usually still considered to be an investment, and such loans can be very risky if not properly secured. If you are told that the loan or investment is “secured” hire an attorney to document the security interest and verify the collateral. (See Number 8.)

5. Beware of secret trading strategies, offshore investments, commodity or currency (FOREX) trading, futures, options and minerals. This could be an article all by itself. Generally, avoid anyone who credits a highly complex or secretive investing technique or touts unusual success. Legitimate professionals should be able to explain clearly what they are doing and how they make money. And if the individual is really making as much money with their strategy as they say they are, they shouldn’t need yours. These types of “alternative” investments nearly always involve extremely high risk, despite what you are told.

4. Work through licensed stock brokers or investment advisors. Even when investing in a private (unregistered) opportunity ask whether the promoter is licensed to sell you the investment, which regulator issued that license and whether the license has ever been revoked or suspended. A legitimate securities salesperson must be properly licensed under most circumstances. If you have any questions contact the Utah Division of Securities at (801) 530-6600.

3. Don’t invest with friends and neighbors. It may seem like doing business with someone you know and trust would be safer, but that is simply not true. All investing involves risk, and just because you trust the individual soliciting the investment does not mean that the investment itself is good. Trust but verify; and if things go badly do not hesitate to aggressively protect your interests.

2. Keep church out of investing. If someone pitching you an investment casually mentions that they used to be the bishop or in some other church position, watch out! Church callings and temple worthiness are not relevant to investment decisions, so beware of those who bring these issues up in an investment pitch.

1. If it sounds too good to be true it probably is. If you are thinking about putting money into an alternative, unregistered, or unregulated investment that promises abnormally high returns, watch out. The fact that others may have been getting their promised returns does not mean you will. All Ponzi Schemes eventually implode, and you may be left holding the bag.

Arizona Resident Cory Williams Sued for $13 Million Fraud Scheme Targeting LDS Ward Members

Today I received a tip that earlier this year the Commodity Futures Trading Commission (CFTC) filed a lawsuit in Federal Court in Arizona against Cory Williams and his company Williams Advisory Group of Gilbert, Arizona. In its complaint the CFTC alleged that Mr. Williams defrauded 40 investors out of at least $13 million in connection with a commodity pool he operated in Arizona.

I am interested in this case because Mr. Williams was an active member of the LDS Church and allegedly victimized many church members in Gilbert Arizona where he lives.

The CFTC charged Williams with soliciting $13 million from family members, friends, neighbors and members of his LDS church ward to invest in his commodities trading scheme. Williams allegedly deposited most of the investors’ money into his personal account and traded futures contracts, but his trading abilities were not as great as he had represented to his investors. He lost more than $8.3 million in the futures market but continued to tell his investors participants that he was making a profit.

The CFTC alleges that Williams told people that he was an experienced futures trader and that his trading had been consistently profitable, but of course it was not. Williams sent weekly text messages to his investors reporting fake trading profits as high as $30,000 per week on their investments, but in reality he consistently lost money. Williams did not have a single profitable month between April 2014 and December 2016.

And as is often the case, Williams also used investor money to fund an extravagant lifestyle; $1.3 million of investor money was diverted to pay for dining, jewelry, vacations and charitable donations such as tithing.

According to James McDonald, Director of CFTC’s Division of Enforcement, “Cory Williams lied to his victims to convince them to invest millions of dollars in his fund. Williams promised to invest their money using his expertise, backed up by a track record of profitable investments. But in reality, Williams simply made up his profitable past, and he spent his victims’ money on himself—using some of it to fund his own dining, travel, and other personal expenses.”

In June the judge in Mr. Williams case froze all of his assets. Mr. Williams then wrote a letter to the court requesting reconsideration of the preliminary injunction and asking for a stay because he was defending an ongoing criminal investigation. “I do not have a lawyer for the civil case, and I do not have the money to pay for a lawyer,” Williams said in the June 12 letter to the court, “I have been advised by my criminal lawyer that anything I say in my civil case can be used against me in the criminal investigation.”

The judge nevertheless refused to stay the civil case, and in July of this year the CFTC asked the court to enter a default judgement and order Cory Williams to pay a civil monetary penalty of more than $9.7 million along with restitution in the same amount. Then on August 28, the CFTC filed a motion for an Order to Show Cause alleging that Williams had violated in the court’s preliminary injunction. The court has not ruled on either motion.

________________________

So how could these Arizona investors have avoided getting scammed by Brother Williams?

As I discussed in my 2014 article “TOP TEN WAYS TO AVOID LOSING MONEY IN A FINANCIAL SCAM,” it is never a good idea to invest with someone just because they are a friend or a neighbor. It may seem like doing business with someone you know and trust would be safer, but just because you know and trust the individual soliciting the investment does not mean that the investment itself is good. You need to do your homework, which in this case would have included asking for trading records and checking with the state and federal regulators to ensure that Mr. Williams had the appropriate licenses.

In 2008 the LDS Church sent a letter to its congregations, urging members to be wary of fraud and warned against “those who use relationships of trust to promote risky or even fraudulent investment and business schemes.” I’ve been urging people here in Utah to keep church out of investing for years now. The bottom line is that if someone casually mentions that they used to be the bishop or in some other church position in the context of an investment pitch, watch out! Church callings and temple worthiness are not relevant to investment decisions.

Joel wrote: ↑October 4th, 2017, 4:34 pm

Arizona Resident Cory Williams Sued for $13 Million Fraud Scheme Targeting LDS Ward Members

Today I received a tip that earlier this year the Commodity Futures Trading Commission (CFTC) filed a lawsuit in Federal Court in Arizona against Cory Williams and his company Williams Advisory Group of Gilbert, Arizona. In its complaint the CFTC alleged that Mr. Williams defrauded 40 investors out of at least $13 million in connection with a commodity pool he operated in Arizona.

I am interested in this case because Mr. Williams was an active member of the LDS Church and allegedly victimized many church members in Gilbert Arizona where he lives.

The CFTC charged Williams with soliciting $13 million from family members, friends, neighbors and members of his LDS church ward to invest in his commodities trading scheme. Williams allegedly deposited most of the investors’ money into his personal account and traded futures contracts, but his trading abilities were not as great as he had represented to his investors. He lost more than $8.3 million in the futures market but continued to tell his investors participants that he was making a profit.

The CFTC alleges that Williams told people that he was an experienced futures trader and that his trading had been consistently profitable, but of course it was not. Williams sent weekly text messages to his investors reporting fake trading profits as high as $30,000 per week on their investments, but in reality he consistently lost money. Williams did not have a single profitable month between April 2014 and December 2016.

And as is often the case, Williams also used investor money to fund an extravagant lifestyle; $1.3 million of investor money was diverted to pay for dining, jewelry, vacations and charitable donations such as tithing.

According to James McDonald, Director of CFTC’s Division of Enforcement, “Cory Williams lied to his victims to convince them to invest millions of dollars in his fund. Williams promised to invest their money using his expertise, backed up by a track record of profitable investments. But in reality, Williams simply made up his profitable past, and he spent his victims’ money on himself—using some of it to fund his own dining, travel, and other personal expenses.”

In June the judge in Mr. Williams case froze all of his assets. Mr. Williams then wrote a letter to the court requesting reconsideration of the preliminary injunction and asking for a stay because he was defending an ongoing criminal investigation. “I do not have a lawyer for the civil case, and I do not have the money to pay for a lawyer,” Williams said in the June 12 letter to the court, “I have been advised by my criminal lawyer that anything I say in my civil case can be used against me in the criminal investigation.”

The judge nevertheless refused to stay the civil case, and in July of this year the CFTC asked the court to enter a default judgement and order Cory Williams to pay a civil monetary penalty of more than $9.7 million along with restitution in the same amount. Then on August 28, the CFTC filed a motion for an Order to Show Cause alleging that Williams had violated in the court’s preliminary injunction. The court has not ruled on either motion.

________________________

So how could these Arizona investors have avoided getting scammed by Brother Williams?

As I discussed in my 2014 article “TOP TEN WAYS TO AVOID LOSING MONEY IN A FINANCIAL SCAM,” it is never a good idea to invest with someone just because they are a friend or a neighbor. It may seem like doing business with someone you know and trust would be safer, but just because you know and trust the individual soliciting the investment does not mean that the investment itself is good. You need to do your homework, which in this case would have included asking for trading records and checking with the state and federal regulators to ensure that Mr. Williams had the appropriate licenses.

In 2008 the LDS Church sent a letter to its congregations, urging members to be wary of fraud and warned against “those who use relationships of trust to promote risky or even fraudulent investment and business schemes.” I’ve been urging people here in Utah to keep church out of investing for years now. The bottom line is that if someone casually mentions that they used to be the bishop or in some other church position in the context of an investment pitch, watch out! Church callings and temple worthiness are not relevant to investment decisions.