Fiance's Parents and Financial Disaster

[MClinton]

This is my first post on these forums, though I have been an observer for some time. Thanks to everyone for their thoughts here as they've helped me become more financiall skilled and have even played a part in my pursuit of a career in financial counseling.


After my fiance's father and brother visited us from out of state for Thanksgiving, we were told that they would unexpectedly be able to provide us $5,000 for our upcoming wedding. We have been saving aggressively for the last several months and will be able to pay cash for the wedding (we're debt free and are dilligent about our financial well-being). While the $5,000 would be an excellent addition to our savings for the wedding, we inquired about this unexpected money and the information we heard troubled us greatly.

My fiance's father didn't understand the investment they were about to enter, but they were in the process of borrowing $500,000 to put into an investment that "would double in a month." This couple makes a combined $55,000/year and owe about $30,000 in credit card debt. They also owe $80,000 on a house worth about 140k.

We have since learned more about this "investment", though we don't know nearly as much as we would like, and it is through a group called "Federal Platform". They claim the ability to generate funding in excess of 100 million dollars to purchase t-bills and, despite common sense and all information I can find, they can manage 100% returns in 28 day maturity t-bills.

This is, quite obviously, a terrifying endeavor. They are able to borrow this money only because those running the investment have artificially raised their credit score by organizing large loans and have proceeded to pay them off on their behalf.

We are doing everything we can to convince them to instead get on a written game plan and simply work a thoughtful debt reduction plan to get themselves financially healthy.

My questions to this experienced community are these:

1. Have any of you heard of this particular investment scheme?

2. What do you recommend is the best method by which to convince them to walk away? Remember, they're being promised BIG things and all we have to contrast it with is truth and hard work.

3. Is it illegal to raise one's credit score in the way I described above?

Thanks for any help you can provide.

-M

[InDebtInDC]

Originally Posted by MClinton

1. Have any of you heard of this particular investment scheme?

2. What do you recommend is the best method by which to convince them to walk away? Remember, they're being promised BIG things and all we have to contrast it with is truth and hard work.

3. Is it illegal to raise one's credit score in the way I described above?

1. Unfortunately, I have heard of this. Several days after the fund transfer clears you can expect the company to disappear. 100% in 28 days for T-bills is not possible. Hell, for anything it's barely conceivable. The companies that I heard about had their assets frozen while the courts figure it out. Meanwhile, the investors are stuck paying back the loan.

2. If this was possible, every big shot investor and hedge fund would have been all over it. The average investor can expect to earn very little from the market because most of the value has already been extracted before the security hits the open market.

If this were a legitimate investment, they would have opened the yellow page and called any broker, and have $100 million in their account before the day is over. Obviously if they pitched to a broker they would get insulted and hung up on.

The fact that they're helping your parents get loans and paying them off shows that they are targetting, with all due respect, naiive and gullible people. If they had tried to target people with $500,000 sitting in their assets, what do you think those people would say? They would scrutinise the pitch and quickly give them the boot.

3. No one can answer this question other than a judge. Generally though, Congress tries to stay out of regulating consumer activities unless there is fraud. If anything, the courts will try to enforce laws against creditor.

If charges were ever brought to bear, meet with a defense attorney. You can't manipulate something if you don't know how the outcome is determined. Your attorney will, I hope, be able to come up more.



Please edit your post and remove portions where you may have implicated your parents in illegal activities, particularly the part about artificially inflating. You have no way of knowing what is or isn't artificially inflating, and posting your speculation will not help your parents.

[Tree0164]

Oh wow the old phrase if it sounds too good to be true, it probably is... comes into play here. I would honestly sit down your finance parents and let them know you are very concerned about this. It may put a strain on the relationship.

It really saddens me that people still fall this for this crap.

[disneysteve]

Originally Posted by Tree0164

if it sounds too good to be true, it probably is

Absolutely!! Get them to drop this IMMEDIATELY. There is no possible way this is a legitimate deal. They will lose everything they invest. And if they are borrowing money to give to these crooks, they will end up deep in debt. I don't even know how it is possible for a couple earning 55K to borrow 500K. That's a crime all by itself.

One piece of advice is to get them to read this thead. If they won't listen to you, maybe they'll get the hint when they see a bunch of impartial strangers saying the same thing. Good luck. It is sad that people still fall for these outrageous scams. People want so much for these things to be true that they take leave of their senses when an offer comes along.

[MClinton]

Thank you, everyone, for the confirmation of what I already thought was the case.

I'll pass along the information you provided in this thread and we will work as hard as we can to keep them out of this "investment". I spoke with my financial advisor this morning and he said he had heard of this in the past through some e-mails he got from his company. They warned advisors to keep an eye out for these types of deals.

I'll keep this thread updated with what occurs.

Again, I appreciate the help.

-Matt

[DebbieL]

Wow, I hope you are able to talk them out of this disaster. How did they get to be their age and still be so naive? This one seems like such an obvious scam to me. It's too bad people prey on suckers like your future in-laws (who I'm sure are decent people, but way too trusting).

[boefixepa]

Tell them the horrible scary truth of what would happen if it was a fraud. I've seen lots of commercials (generally retiree's don't ask me why they target this age group but they do) about couples buying into this 'double your money' thing and how they were burned. Hunt up stories and let them read the horrible things that can happen. Then ask them if they want this to happen to them. Do everything you can to MAKE them do their homework and find the scam in this, IT IS ONE. Ask them for reference, look them up at the BBB (Better Business Bureau), we have a local news program that hunts down frauds call them if you have one and ask if they have ever heard of this place, visit their place of business (most don't have one) and 'see' where they are working from, ask to speak to their 'CEO'. Do whatever you have to do to 'show' or 'prove' to your parents that this can not be for real!!!

[kv968]

I've never heard of this particular scam, but that's exactly what it is...A SCAM!!! The saddest part of it is, not only would your parents lose what money they do have, they'll be left saddled with an enormous loan that they'll never be able to repay. As others have suggested, sit down with your parents and try to reason with them. Sometimes people get blinded with these "get-rich quick" and don't listen to reason. As Steve said, people want to believe in things so badly that they toss good judgement and rational thinking aside. My signature speaks to that.

[loanstar]

Its so sad that there are crooks out there who delibaretely target vulnarable people, there's no way you can double your money in 28 day, otherwise the whole world would be doing it. furthermore, the fact that they're willing to forge/inflate one's credit rating is a sure sign that they're dishonest.

[Saving in So Cal]

Your in-laws' jurisdiction probably has a task force with representatives from multiple law enforcement agencies that handles elder abuse/financial fraud investigations. Check with the local police department or prosecutor's office. Have your in-laws call and say they have been approached with an investment opportunity, it sounds too good to be true, and they want to talk to someone to make sure it is legal. If they are concerned about their own criminal culpability, they can ask to remain anonymous (although the call itself will probably be recorded) and they can keep the details general. In other words, they can tell whomever handles the call what they and other investors have been told about the investment opportunity, but not what they themselves have actually done. My guess is that the person handling the call will quickly be able to point out several flaws in the investment opportunity.

In terms of the artificial inflation issue, I am wondering how the investment company is able to obtain loans and pay them back in your in-laws' name. My concern is that your in-laws may have given them some sort of power of attorney to access bank accounts, sign loan papers, etc. If so, they need to find out what is required in their jurisdiction to revoke the power of attorney and they need to revoke it right away.

[MClinton]

Thanks, everyone, for your help. Keep it coming.

I have been working like crazy to convince them that this is bogus, but they continue to be lured by promises of fast, easy money. I'll remove all names from the following e-mail correspondence for protection, but here is the explanation they give of the "investment":

"The T-bills themselves are bought at a huge wholesale discount (as an example $10). There are already buyers lined up...such as brokerage firms that pay a price of 9 times ($90), a very short sale, then they retail to individual customers for more. So, we aren't talking just the rate of return on T-bills until their maturity typical investment."

This is an obvious scam. There's no way anyone is buying T-Bills at a "huge wholesale discount". They talk about T-Bills like they're watermelons.

They explain their unwillingness to talk with me or my financial counselor friends about this this way:

"These traders to not talk to just anyone with questions about the platforms. (Something about their licence bars them)."

Another classic scam trick to keep from having to face anyone with knowledge of the industry.

They finally explain why none of the people I speak with have heard of this this way:

"This involves bankers/traders at a level of the VERY rich with their own class of bankers at the top level of banking that even most bank presidents and financial planners/brokers are not familiar with. That is why the people you and I have talked with do not understand what this is."

I'm really concerned that they're going to take the plunge on this thing. It's terribly frustrating watching someone do something like this when you know it will be devastating to them.

Again, I appreciate everyone's encouragement and reassurance on here. I'm using your words and recommendations to do the right thing.

Thanks.

-Matt

[boefixepa]

From
9 money rules to live by - MSN Money

The 30-day Treasury bill, for example, is one of the "safest" investments around if you're solely concerned with getting back your original investment. The T-bill is backed by the full faith and credit of the U.S. government. But the average return on a 30-day T-bill over the past 80 years is just 3.7%, according to Ibbotson Associates. That's just above the historical 3% inflation rate for the same period; if you factor in taxes, you probably lost money.

Yeah, like they are going to make money on that!!!

From Better Business Bureau

Treasury bills (T-bills), notes and bonds. These bonds can be purchased from the government directly at no charge, or from a broker for a fee, typically about $50. The minimum investment is $1,000, and it's guaranteed by the government. T- Bills are purchased at a discount, in short investment periods (13 and 26 weeks), and pay off their face value at maturity. Other treasury bonds can be bought below or above face value ("par"), and pay regular interest ("coupon rate"), usually twice a year. A $1,000 bond with an interest rate of 8% would pay $40 every six months until it matures, when it can be redeemed for its face value. You can always sell your bond as you would sell a stock. However, be aware that a bond's price fluctuates before reaching maturity. So if you sell prior to maturity, you risk getting less than you paid for the bond.

And just sow/read this whole page...Better Business Bureau

And read and look over this whole page
Institutional - Scams Involving Treasury Securities

I found all this in less then 5 minutes....make them do the research or do it for them and out it in their face. Try to do all you can to make them see reality.

Good luck, in the end it is their choice.

[DebbieL]

I think you need to call the police in their town with all the details you do have and do everything possible to get this thing shut down (hopefully before your future in-laws make the dumbest mistake of their lives). I think it's time to bring in outsiders to protect them from themselves if they are unwilling to listen to reason. I would call an expert in matters such as power of attorneys and get some emergency help. These people need to be saved from themselves at this point. Maybe you can set something up through the courts that will prevent them from taking this action. I would be calling everyone I could think of: lawyers, their banks, media, etc. Hopefully if you have some kind of official record of having tried to take control of their finances away from them due to their “unstable” state of mind it will help them get off the hook for this mess if they do get themselves into it. Do whatever it takes (even though they may hate you at this time for it).

My parents have both given my sister and I power of attorney in the event that they ever (in my Mom's words) "Lose our marbles". It would only kick in if we felt they were no longer capable of making reasonable decisions for themselves (like if they were planning to do something like your future in-laws are planning). I truly hope we never have to use it.

[disneysteve]

Originally Posted by DebbieL

I would be calling everyone I could think of: lawyers, their banks, media, etc.

Great idea. Do your parents have an attorney? I'd give him/her a call.
Call the local news media and tv stations.
Call the state attorney general.
Call the SEC.

I'm sure there is someway to shut these folks down and prevent lots of people like your inlaws from making a horrible mistake.

[disneysteve]

If this issue is still pending, this month's issue of Kiplinger's has an excellent article on investment scams targeting retirees. They don't mention this specific scam, but they mention others like it. So if it isn't too late, pick up a copy and get they to read the article.

[MClinton]

Originally Posted by disneysteve

If this issue is still pending, this month's issue of Kiplinger's has an excellent article on investment scams targeting retirees. They don't mention this specific scam, but they mention others like it. So if it isn't too late, pick up a copy and get they to read the article.

Unfortunately, the issue is still pending. I'll get a copy and see how it goes. Thanks much, Steve, for the reference.

-Matt

[disneysteve]

Originally Posted by MClinton

Unfortunately, the issue is still pending.

That isn't unfortunate. That means you still have time to knock some sense into their heads. Good luck.

[MClinton]

Originally Posted by disneysteve

That isn't unfortunate. That means you still have time to knock some sense into their heads. Good luck.

Last time we spoke they said, "we wish we had never even told you that we were going to invest in this...we knew you wouldn't understand."

We're trying to be helpful, but no good deed goes unpunished, right?

Thanks again. Anyone else hear about this scam specifically?

Thanks.

-Matt

[disneysteve]

Matt, we can't protect people from themselves. Greed is a powerful emotion and hard to overcome with facts. That's why so many people get scammed. I just read an article on a different (but related) topic - slot machines - and the author said that Americans are generally "math deficient". That's why these scams work. That's why people play slots or buy lottery tickets. They simply don't comprehend why these things are rip-offs.

I wish them luck but I'm quite certain how this will end up if they proceed.

[thekid]

Call the police and Better Business Bureau. Heck, if it's interstate, call the FBI. This is criminal fraud, pure and simple. You have written correspondence describing (...rather avoiding any logical description for "top secret super rich even bank presidents don't know" reasons ) evidencing the scheme.

These people are perpetrating a crime and attempting to steal 500 000$ from your in-laws. Do all you can to attack them. Heck, write them saying you will go to the police with their fraud and that they should leave your in-laws alone.

This is robbery in broad daylight. This is urgent. Get the authorities involved.