Saturday, July 21, 2012

The "if it haven't been charged it's not a scam" fallacy

WASHINGTON, DC - MAY 10:  U.S. Federal Trade C...
Federal Trade Commission Deputy Director Jessica Rich . (Image credit: Getty Images via @daylife)
If a suspect scheme has been pretty thoroughly debunked, its "supporters" will often fall back to the "if it haven't been charged it's not a scam" fallacy as a defense. It usually takes the following form:
A: Acme XYZ is a scam because of ____, ____, and _____. 
B: Acme XYZ has not been charged by any government regulators! If it's illegal it would have been shut down by now/ long time ago! So it's legal!
Technically, this is a "red herring", as it neither disproves the premise "Acme XYZ is a scam", nor does it prove the counter-premise "Acme XYZ is not a scam".

The fact (assuming it is true) that Acme XYZ has not been charged / convicted as a scam does not mean anything in itself. You can be a scam, and not be charged (or convicted). It simply means the government have yet to act. It does not preclude them from acting in the future.

There are plenty of reasons why a scheme may be illegal (against the law), but the government had not acted against it (yet). it could still be gathering evidence, for example. At least two Federal agents joined Andy Bowdoin's Ad Surf Daily Ponzi in order to obtain first-hand evidence, for example. In case of Burnlounge, state attorney general's office gathered evidence for a full year before going in with the help of the FTC.

Government may waiting for sufficient number of consumer complaints. As the expression goes, they have "bigger fish to fry", other scammers to catch, and so on.

There could be a "turf fight" between the agencies, esp. when the scam touches multiple jurisdictions.

There really isn't much point to speculate *why* the government agencies have acted.

Just beware when a company official starts to use this fallacy.

FHTM did so.

TVI Express did so.

Will your "company" do so next?

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