[narrator] Scrolling through social media,
there are lots of people offering secrets to make money quick.
If you're gonna make it, you need the right mindset.
If you're not thinking big, you're not getting big.
[narrator] You can find the same kind of guys on every platform,
with the same kind of spiel.
I'm not selling you a fish, but I'm going to teach you how to fish,
to be an entrepreneur.
Marketing, networking,
enunciating your potential.
[narrator] And those guys existed before the internet, too.
Mmm!
I was just like you, nine-to-five grind,
fluorescent lights sucking the life right out of you.
But I can promise you this…
there's nothing like the real thing.
And if you call in the next 15 minutes, I'll throw in a second copy for free.
For free!
[narrator] Every generation had their own version of that guy.
What's there to think about?
There's no quicker road to mediocrity than procrastination.
This is your wake-up call, pal.
-[knocking] -[narrator] The words change,
but the pitch was the same.
Now, I would never take you for a maroon.
I know that you're smart.
And deep down, you know this isn't just some flim-flam.
But this is your golden opportunity.
[narrator] And we kept falling for it.
[cash register rings]
History has taught us a lot, but for some reason this is an exception.
Before even Adam ate the apple,
financial scams have been making people millionaires.
So the real question isn't how to get rich quick.
The real question is…
-[director] Cut! -[narrator]Why?
[crewman] Tail slate.
[narrator] Why do we keep falling for the same old act,
-and how can we avoid taking the bait? -[exasperated sigh]
[man] Here in 1919 is Charles Ponzi,
self-styled financial wizard.
You think you're being swindled, ask your lawyer to read those contracts.
[man 2] Generally the motto I would always use is,
if it seems too good to be true, it probably is.
Sites that tell you that you have to pay money to get free money are a scam.
[man 3] Bernie Madoff played on the vulnerability of everyone.
[narrator] In 1821, a Scottish adventurer, General Gregor MacGregor,
sailed from the shores of Central America to the United Kingdom.
On his travels, he earned a royal title,
His Highness Gregor Cazique of Poyais.
And he arrived in London with an opportunity of a lifetime.
He discovered a new Promised Land, the country of Poyais.
A book, Sketch of the Mosquito Shore, Including the Territories of Poyais,
by an elusive captain, Thomas Strangeways,
described rivers lined with globules of pure gold,
and soil so rich it could yield three harvests a year.
Gregor MacGregor opened an office in London,
unfurled the Poyaisian flag,
and composed a ballad, "The Poyais Emigrant."
"Yon fairy land o' wealth and joy,
a home o' rest to bless the weary.
We'll a' gang to Poyais together."
People could come exchange pounds for Poyais dollars
and buy a piece of Poyais itself, as hundreds did.
In today's dollars, MacGregor raised over 20 million.
There was just one problem.
There was no Poyais.
That's Honduras.
That's Nicaragua.
Captain Strangeways was Gregor MacGregor.
He made the whole thing up.
It was one of the most outlandish scams in history,
but it was far from the first or the last.
Most human beings are terrible lie detectors.
Most of us think we're good lie detectors.
That's one reason why we're often fooled.
Evolutionarily speaking, we're actually wired to trust,
but it also means that we're susceptible to bad actors
who take advantage for their own personal, malicious aims.
[narrator] You may have seen ads like these congratulating you
for winning a lottery.
You just need to pay taxes to claim the prize.
Or messages saying you've been approved for a loan.
And then right when you believe in all your heart
they about to put the money in your account,
that's when they then ask you to pay a certain fee
up front.
[narrator] These are all advance fee scams.
You pay some money now in exchange for a lot of money later…
that never comes.
The most successful version of this scam dates back hundreds of years.
You get a letter from a very wealthy person
who needs a little money to escape a terrible situation,
and on the other side will give you a handsome reward.
These letters used to come from supposed prisoners,
but more recently they've come from Nigerian princes.
Another well-known scheme is one that involves a Nigerian prince.
It's been going on since even before the internet was a thing.
In Louisiana, a man under arrest tonight,
accused in the notorious "Nigerian prince" email scam.
We always joke about the Nigerian prince.
He doesn't exist!
He's not gonna give you money if you give him your bank account.
[narrator] But advance fee scams like these
still manage to rake in millions of dollars a year.
Another popular scam that's just slightly more complicated
and way more fun to say…
[anchor] Pump-and-dump schemes.
-Pump-and-dump. -Pump-and-dump.
[female anchor] Pump-and-dump scheme,
which has nothing to do with breastfeeding.
[narrator] Instead, it works like this.
You persuade people to invest in something that's worthless,
pumping up its price, and then you dump your stock when it's at its peak.
This happens a lot today with cryptocurrency.
A schemer will send out a pump signal in a messaging app like Telegram.
Insiders rush to buy the coin, boosting the price.
Then other people, who think it must be a hot stock, rush in and buy it too.
And then the insiders sell off.
The entire cycle takes minutes.
And then there's a slower-burn investment scam
that can survive for decades.
It's named after Charles Ponzi,
an Italian immigrant who, back in the 1920s,
made a fantastic promise.
He'd double your money in 90 days, guaranteed.
But in reality,
he was simply paying early investors with money from new investors.
That's how all Ponzi schemes work.
It's borrowing from Peter to pay Paul,
and then borrowing from Paul to pay Jane, and so on and so on.
The only hitch is,
if enough of the investors ask for their money back at once,
the whole thing collapses.
Which is what happened in 2008,
when this type of scheme infamously came back into the spotlight.
For decades, Bernie Madoff was able to launder
billions of dollars in Ponzi proceeds,
essentially through a single set of accounts
at JPMorgan.
Apparently he was purporting to be getting 10, 15% returns on their money,
when in fact, he'd lost all of it,
and pretending to pay off the old people with new people's money.
A reason people trusted him so much
was because he was such a pillar of the American Jewish community,
and people thought, "Good old Bernie, he's above suspicion."
Turned out he's a total crook.
[Stephen Greenspan] Ponzi schemes are known as affiliation scams,
because they tend to victimize people who have some--
something in common, such as religion or ethnic identity, with the scammer.
[narrator] Ponzi schemes often get confused with pyramid schemes,
but they're different.
Here, you don't borrow from Peter to pay Paul.
You pay Peter if he convinces Paul to join your scheme,
and then if Paul brings in Jane, both Peter and Paul get a cut,
and so on and so on.
Multi-level marketing companies also rely on recruitment.
You may have seen friends online trying to sell you products
and recruit you to also sell those products.
But MLMs are legitimate businesses,
as long as most of the money comes from outside customers buying their products.
Pyramid schemes aren't.
Their products are pretty worthless,
so most of the money comes from recruitment.
And when the scheme runs out of new people to recruit,
then the whole thing collapses.
And then there's a final category:
coaching schemes.
They're similar to advance fee schemes,
but instead of paying money for the promise of money,
you pay money for knowledge that they promise will make you money.
Wouldn't you like to learn how to make a fortune in real estate
without needing any money?
[narrator] Except the promises are false.
The money-making programs largely don't deliver,
and you're often lured into paying for progressively more expensive classes,
because they're great salesmen who use every tactic in the book,
starting with that fantastic promise.
I assure you, it's very real, and actually pretty easy to do
if you just follow my system step by step.
[narrator] They have compelling rags-to-riches stories.
Jeff, seeing how your life is now,
it's hard to believe that before you discovered your shortcuts,
you were dead broke, living in your sister-in-law's basement.
[narrator] Testimonials from supposedly happy customers.
Using just one of Jeff Paul's shortcuts,
I'm currently making over $250,000 a year.
[narrator] And they create a sense of urgency.
You have to get moving, because I'm only looking for a few people,
a few motivated people, hard-working people in your area.
[narrator] All of these kinds of schemes rely on similar tactics,
and they all tend to thrive at certain moments:
moments of change.
At the time Gregor MacGregor made up Poyais,
London was in the grips of a great speculative flurry.
People were getting rich on all kinds of new hot things,
including countries.
All these nations just declared independence.
It wasn't a stretch to think Poyais may be among them.
So you have con artists throughout history
who come up during wars or pandemics,
or different things that are scary and new, or exciting and new.
That's when con artists can actually swoop in
and give you the stories that you want to believe in,
give you the truth that you want to be the truth.
[narrator] And technology has made that easier and easier.
[man] The railroad, the telegraph, eventually the telephone, the airplane,
enabled people to interact with each other
not only across countries, but also continents.
How do you evaluate people that you've never met?
All of that makes trust more important,
all of it makes fraud more possible, actually,
and also potentially, uh, more harmful.
[narrator] But it wasn't the railroad or the telegraph
that opened the floodgates for scams.
It was another innovation that came in the '80s.
[upbeat electronic music playing]
[spokesperson] VacuFresh is so airtight, even water can't seep in.
[spokesperson 2] The Ginsu slices bread so thin you can almost see through it.
[spokesperson 3] Don't delay. In previous years,
both Ski-Lokr and Rockies have sold fast.
[narrator] Infomercials have been a thing since the '40s.
Ladies and gentlemen, if you order right now…
[narrator] But the format really took off with the rise of cable TV.
Hey, how many of you would like to be a millionaire?
Raise your hand.
[Edward Balleisen] And that created a vast array of new channels
that operated late into the night.
For scammers, the costs of entry were reduced.
The thing about fraud and scams,
you don't need everybody to buy, just enough people.
[dial-up connection beeping]
[narrator] And then the cost of entry fell through the floor.
[Maria Konnikova] With the internet age, it becomes much easier to cast a wide net.
And so people who wouldn't necessarily succeed
in a world where the barrier to entry was higher
can make a go of it here, so I think there are more petty con artists.
[narrator] Online, scammers took advantage of every new thing.
Email, of course.
That's the reason we have spam folders.
When internet marketing became a thing,
a new crop of schemes promised to teach you how to make millions online.
And then social media gave scammers a whole new way to reach audiences.
Then Amazon came along, and scammers spawned a new kind of coaching scheme,
teaching you how to buy products cheap, and then sell them for profit.
And as cryptocurrency took off,
so did new coins that, in the words of the FBI, were of a Ponzi-type nature.
The world is not anymore the way it used to be.
Mm-mm! No, no no!
Bitconnect!
We say, "Oh, am I going to be that old fuddy-duddy
who didn't take advantage of this great opportunity?"
[narrator] And get-rich-quick schemes today
are using the exact same tactic they used 200 years ago.
On June 11th, 2016,
Dr. Ruja Ignatova arrived in London with an opportunity of a lifetime.
This network was created to become,
and to fuel the growth, of OneCoin,
which I strongly believe will be the number-one cryptocurrency worldwide.
[narrator] OneCoin was supposed to be faster, cheaper and more secure.
It was meant to be…
-The bitcoin killer. -[audience cheering]
[narrator] And there was urgency.
We're moving into a huge phase two now.
Whatever coins you have in your account, or in the mining,
-we will double the coins in your account. -[audience cheering]
[narrator] And she tricked other people into promoting it for her.
-We wish you… -[both] …success for all,
-and then you will see… -[both] …what dreams may come.
[narrator] OneCoin offices sprung up around the globe,
and it spread like wildfire.
People from some 175 countries
poured more than four billion dollars into this exciting new cryptocurrency
between 2015 and 2017.
But when the day came when people would be able to turn OneCoin into cash
and become rich beyond their wildest dreams,
Ruja was nowhere to be found.
The Cryptoqueen vanished into thin air.
She'd made the whole thing up.
And the remarkable thing is, there were so many warning signs.
In 2015, a cryptocurrency blog called OneCoin a scam.
A year later, so did Norway's direct selling association,
as did Italy's antitrust authority,
and the Hungarian central bank.
But to many investors, those warnings didn't matter,
thanks to another tactic:
insist your scam is definitely not a scam.
We get criticized so much:
"We're a network marketing company," we're not a real cryptocurrency,"
whatever I hear out there.
We will say to the regulators that we are the most transparent,
most powerful, and most legal cryptocurrency out there.
[narrator] In 2019,
federal prosecutors pressed charges against Ruja and several employees.
The case against Ruja is ongoing,
but Ruja's brother, who took over OneCoin after she disappeared,
pleaded guilty to fraud and money laundering charges.
And yet, almost 20,000 people signed this petition.
Victims of fraud process it in different ways.
On Facebook, there's a OneCoin Victim support group
that has almost 3,000 members, founded by Jen McAdam.
She convinced her family and friends to invest nearly a quarter million euros.
And like many fraud victims, she blames herself.
Since realizing that it was a scam,
the regret, the shame, the guilt, it never leaves.
You live with that daily.
[narrator] We'll never know the true number of people hurt by OneCoin.
Forty percent of fraud victims don't tell anybody,
not even their friends or family,
and only 20% report it to authorities.
But these are just estimates.
You can't measure reports that don't exist.
Some consumers feel as though if they're not gonna get that money back,
why bother to file a complaint?
And I tell them,
"The way that these people are apprehended
is because you took the time to file a complaint.
The information that you provide can help law enforcement locate the scammers."
[narrator] You can go to these websites.
And then in the US, it works like this.
[James Perry] When a consumer files a complaint,
the complaint is then forwarded mainly to the Federal Trade Commission,
and the Federal Trade Commission have a database.
The database detects patterns of fraud.
Then it will point out to law enforcement,
"This is where these scammers are most likely located."
[narrator] A court found that this guy engaged in false advertising.
And this guy.
And this one.
And Bernie Madoff is serving 150 years behind bars.
But…
Law enforcement do not have enough manpower to go after each and every scam.
It's one of the reasons it's often very difficult to prosecute people for fraud.
The evidence often cuts more than one way.
The issue often turns on the intent.
[narrator] And just because there are laws against false advertising,
that doesn't mean you can't embellish.
It's called puffery.
It can be acceptable to exaggerate,
as long as you keep it vague and subjective,
or can claim no reasonable buyer would take it seriously.
It's often really hard to tell where the scam ends and puffery begins.
A better way to put it,
it's really hard to tell where puffery ends and fraud begins.
[narrator] All of these tactics are just Marketing 101,
and simply losing money on a program that promised to make you rich
doesn't make it a fraud.
In fact, a study of hundreds of legitimate multi-level marketing companies
found that workers actually lost money.
And online, dozens of financial gurus promise to teach you how to get rich,
using familiar tactics.
[man] Here's what's so fucking amazing…
You can make an incredible income without ever creating a single product,
running a single ad, and cold calling a single person.
That deserves a round of applause.
[audience applauding]
[man 2] I'm able to make the transition from working a corporate job
to working for myself
from anywhere and be able to make millions of dollars per year doing that.
[man 3] Two guys that I trained starting one year ago…
They were making under five grand a month one year ago.
Now they're making $210,000 a year dropshipping on Facebook.
[narrator] Some of their customers say that they've lost money,
or the money-making programs don't deliver.
But as of 2020, none of those gurus have been charged with fraud.
It's just really, sometimes, hard to identify
the well-meaning, confident entrepreneur from the scoundrel.
When people ask me, "Are there specific types of people who fall for con artists?
Does it have to do with intelligence?
Does it have to do with education? Does it have to do with gullibility?"
Turns out the answer is no.
[narrator] Some studies show that seniors are more susceptible to scams.
Others found that they are less likely to fall for one.
I spent lots of time trying to find common characteristics,
and they don't exist.
Everybody, even myself…
Everyone is susceptible to becoming a victim of a scam.
[narrator] James Perry once bought rare coins,
supposedly worth millions of dollars,
that turned out to be fake.
The joke was on the person whose job it is to prevent people from becoming victims.
[narrator] Or take Stephen Greenspan.
He wrote the book on this.
Literally.
The first copy of the book I held in my hand
on December 10th, I believe, 2008.
[narrator] The next day,
FBI agents arrested the man to whom he'd entrusted his savings,
Bernie Madoff.
[Stephen] Canadian columnist Robert Fulford wrote that,
"Stephen Greenspan will be remembered as
the gullibility expert who forgot to read his own book" on gullibility.
Without trust, I mean, where are we as a society?
We're nowhere, we can't build societies if we don't trust one another.
[narrator] And across societies, trust goes hand-in-hand with prosperity.
[Edward] Most of the time, you can trust other people.
And if you don't then have a basic sense of trust,
you're gonna be spending an awful lot of time trying to decide
whether the person you're talking to is telling you the truth or not.
You're gonna spend an awful lot of time investigating
whether the thing you're about to purchase is the genuine article or not.
[narrator] Trust may lead us to buy a piece of a fictional paradise.
But it also helped us build a world
that's closer to paradise than our ancestors could have ever imagined.
One of my favorite quotes about this comes from the late, great Ricky Jay,
who was obsessed with con artists,
and he said in an interview, a number of years before his death,
that he wouldn't want to live in a world where we couldn't be conned,
because that's a world where we don't believe in anyone or anything.
And I agree with him.
I don't think that's a world worth living in.