The dark side of Artificial Intelligence and the proliferation of online scams.
Fools & their money
“A fool and their money are soon parted”
This is a proverb from the late 16th century where it was expressed as a rhyme in Thomas Tusser’s work “Five Hundred Points of Good Husbandry”.
Financial scams and skulduggery have been around for a long time!! And won’t be going away anytime soon.
Pyramid Schemes have been around for years; typically, to invest you need to recruit other investors into the scheme. The investment company seems to have a fantastic thesis on how to make money and often there are glossy brochures, web sites and presentations in plush offices to convince unsuspecting investors of how fantastic the business is.
Bernie Madoff ran his pyramid scheme for years, recycling investors capital into returns that were above average and consistent. He had many very happy investors for seventeen years until he didn’t have the capital to generate the returns and he was found out. He defrauded investors out of tens of billions of dollars. In 2009 he was sentenced to 150 years in prison and was forced to forfeit $170 billion in restitution. He died in prison.
More recently we’ve had the BHI debacle here in South Africa. BHI stood for Berkshire Hathaway Investments, but there was no association with the famed investment firm in America. It just seemed to give some legitimacy. Not everyone could invest in BHI, you had to be invited. And, you had to have a decent amount of capital to invest, otherwise it didn’t serve the firm to take you on as a client. Sadly, investment advisors could pool the assets of their clients to count as a worthwhile investment and smaller investors (who could least afford it) lost their money in the scheme. When the money ran out, the founder, Craig Warrener handed himself over to the police.
Interestingly, BHI was not registered with the Financial Services Conduct Authority and were not a licenced Financial Services company, but they still attracted sophisticated investors and advisors into their scheme by offering attractive returns for many years.
You will have heard of “Phishing” where scammers lure victims into clicking on links in emails or SMS’s to gain access to personal banking details. There are so many examples; a SMS to say there has been fraud on your credit card, please click on a link, or phone a number. And there is a well-spoken person on the other end of the line who asks for all your personal information; ID numbers, credit card details, etc and go on a shopping spree on your account.
Or a message to tell you there is a parcel to be delivered, and you just need to pay the duty before it can be delivered. Or you’ve won a car but need to pay the licencing and registration fees. People fall for these scams even though they haven’t ordered anything from abroad or bought a raffle ticket to win a car!!
And now with the rise artificial intelligence and “deep fakes”, it is going to become even more scary. Question everything!! If it sounds too good to be true, it probably is!! In fact, Warren Buffet mentioned something in his AGM on 4 May 2024 in reference to the rise of AI. He said, “If I was interested in investing in scamming, it’s going to be the growth industry of all time.”
Recently, there has been a prolific scam circulating in South Africa of Elon Musk offering a fantastic investment opportunity to his “fellow countrymen” and it is really convincing, except that Elon Musk does not consider himself a South African and wouldn’t really be bothered with amounts of R4,000 to do algorithmic trading in cryptocurrencies. While the original scam videos have been taken down by YouTube, the video below gives a good explanation of how the scam worked and shows the original “deep fake” version of the scam. Anyone could fall for it and many did. There is no recourse if you fall for a scam, so please be careful out there.
Deep Fake Elon Musk Scam
Even in legitimate institutions, if a higher rate of return is offered than is generally available, there is probably a reason. Either an investor needs to lock their capital up for a term – a five-year fixed deposit will offer a better return than a 32-day notice account, but the downside is that you can’t access it for five years (and a lot can happen in five years!). Even when a bank or institution offers higher interest rates than what is normal, there is a reason for it. They can’t raise the money anywhere else. Think of a bank like African Bank. They were a legitimate organisation, but they had made some mistakes and needed to attract deposits, so they offered higher interest rates than their contemporaries. And it is not to say that you should never invest in these higher yielding structures, but you’ve got to know the risks and position your investment appropriately.
Scammers, cheats, and crooks have always been around, and will always be around. Be sensible when it comes to money. Don’t believe everything you hear about fantastic investment returns. Believe me, if it was that easy to make outsize returns, everyone would be doing it. Getting any decent returns is hard enough!! Some opportunities do exist from time to time, but sadly these are not the opportunities that are offered to the public!
We’ve gotten so used to putting trust in 3rd parties to handle all kinds of things for us, whether it’s managing our money or handling our data, that we just accept what we’re told from them. Going forward, in this era of sophisticated online scams is pays to live by these words: “Don’t trust, verify”.
Asset Class Returns
The table below represents a rolling year view of the major asset class returns that we track. It offers a view of the asset classes we use to diversify your portfolio.
Fools & their money
“A fool and their money are soon parted”
This is a proverb from the late 16th century where it was expressed as a rhyme in Thomas Tusser’s work “Five Hundred Points of Good Husbandry”.
Financial scams and skulduggery have been around for a long time!! And won’t be going away anytime soon.
Pyramid Schemes have been around for years; typically, to invest you need to recruit other investors into the scheme. The investment company seems to have a fantastic thesis on how to make money and often there are glossy brochures, web sites and presentations in plush offices to convince unsuspecting investors of how fantastic the business is.
Bernie Madoff ran his pyramid scheme for years, recycling investors capital into returns that were above average and consistent. He had many very happy investors for seventeen years until he didn’t have the capital to generate the returns and he was found out. He defrauded investors out of tens of billions of dollars. In 2009 he was sentenced to 150 years in prison and was forced to forfeit $170 billion in restitution. He died in prison.
More recently we’ve had the BHI debacle here in South Africa. BHI stood for Berkshire Hathaway Investments, but there was no association with the famed investment firm in America. It just seemed to give some legitimacy. Not everyone could invest in BHI, you had to be invited. And, you had to have a decent amount of capital to invest, otherwise it didn’t serve the firm to take you on as a client. Sadly, investment advisors could pool the assets of their clients to count as a worthwhile investment and smaller investors (who could least afford it) lost their money in the scheme. When the money ran out, the founder, Craig Warrener handed himself over to the police.
Interestingly, BHI was not registered with the Financial Services Conduct Authority and were not a licenced Financial Services company, but they still attracted sophisticated investors and advisors into their scheme by offering attractive returns for many years.
You will have heard of “Phishing” where scammers lure victims into clicking on links in emails or SMS’s to gain access to personal banking details. There are so many examples; a SMS to say there has been fraud on your credit card, please click on a link, or phone a number. And there is a well-spoken person on the other end of the line who asks for all your personal information; ID numbers, credit card details, etc and go on a shopping spree on your account.
Or a message to tell you there is a parcel to be delivered, and you just need to pay the duty before it can be delivered. Or you’ve won a car but need to pay the licencing and registration fees. People fall for these scams even though they haven’t ordered anything from abroad or bought a raffle ticket to win a car!!
And now with the rise artificial intelligence and “deep fakes”, it is going to become even more scary. Question everything!! If it sounds too good to be true, it probably is!! In fact, Warren Buffet mentioned something in his AGM on 4 May 2024 in reference to the rise of AI. He said, “If I was interested in investing in scamming, it’s going to be the growth industry of all time.”
Recently, there has been a prolific scam circulating in South Africa of Elon Musk offering a fantastic investment opportunity to his “fellow countrymen” and it is really convincing, except that Elon Musk does not consider himself a South African and wouldn’t really be bothered with amounts of R4,000 to do algorithmic trading in cryptocurrencies. While the original scam videos have been taken down by YouTube, the video below gives a good explanation of how the scam worked and shows the original “deep fake” version of the scam. Anyone could fall for it and many did. There is no recourse if you fall for a scam, so please be careful out there.
Even in legitimate institutions, if a higher rate of return is offered than is generally available, there is probably a reason. Either an investor needs to lock their capital up for a term – a five-year fixed deposit will offer a better return than a 32-day notice account, but the downside is that you can’t access it for five years (and a lot can happen in five years!). Even when a bank or institution offers higher interest rates than what is normal, there is a reason for it. They can’t raise the money anywhere else. Think of a bank like African Bank. They were a legitimate organisation, but they had made some mistakes and needed to attract deposits, so they offered higher interest rates than their contemporaries. And it is not to say that you should never invest in these higher yielding structures, but you’ve got to know the risks and position your investment appropriately.
Scammers, cheats, and crooks have always been around, and will always be around. Be sensible when it comes to money. Don’t believe everything you hear about fantastic investment returns. Believe me, if it was that easy to make outsize returns, everyone would be doing it. Getting any decent returns is hard enough!! Some opportunities do exist from time to time, but sadly these are not the opportunities that are offered to the public!
We’ve gotten so used to putting trust in 3rd parties to handle all kinds of things for us, whether it’s managing our money or handling our data, that we just accept what we’re told from them. Going forward, in this era of sophisticated online scams is pays to live by these words: “Don’t trust, verify”.
Asset Class Returns
The table below represents a rolling year view of the major asset class returns that we track. It offers a view of the asset classes we use to diversify your portfolio.