Sunday, October 25, 2015

Scam Psychology: Victim Mindset is all about asset recovery, not justice

JusticeAlwaysLate, a FB blogger in Malaysia who primarily blogs in Chinese / Cantonese, recently relayed a little anecdote which I thought was rather... illustrative of the victim mindset. The scam name is not important, but it's a pretty big one in China that resulted in arrests earlier this year called Nanning (南寧) any way, it goes like this:

有个南宁受害者来找哦,丈夫倾家荡产相信兄弟,投资了下去。先是云数贸, 然后圆梦都亏大本,兄弟建议他用南宁回本,有事他包。
A certain victim of Nanning scam came to tell a sob story. Husband is about to go bankrupt, believing in a buddy, invested everything, against and again, first it was YSM (a scam fronted by a Chinese guy), then YC and lost big in both. Buddy told him he can make it back with Nanning, and the buddy claims he'll cover the losses if it happens.  
Thus, this husband threw everything that's left into the Nanning scam, leaving wife and parents with nothing. She asked me, what should she do? Family needs money now to live.  
I said, go to the cops, have the perps arrested.  
She said, no way, can't get the money back that way. Buddy promised that he'll make up the money later. What should she do now?  
I said, give me their information and background. I'll reveal them so they can't hide anywhere.  
She said again, no way they'll return the money if you do that. Now what?  
I said, why are you thinking for these crooks? THEY owe YOU money!  
She said, It's not that she's not going to the cops, she had to get the money first, THEN she'll go to the cops.  
I said, so why are you here? Chitchat?  
Her final answer was, alright, guess I was mistaken about you. 

The victims have primary emphasis on recovery of money. They realize they had been deceived, but they don't want justice done. They want to be made whole first. This greed (what got them scammed in the first place) lead them to believe that they will get the money back, either someone promised them so, or they decided to lock their morals in the basement and went all out recruiting (i.e. turned judas goat) so they can get their money back.

They don't realize that the money is GONE, and they've just seeing excuses after excuses.

It is this type of mindset, that emphasizes recovery (I want my money back, justice everybody else can wait) that makes financial scams, esp. large group financial scams like pyramid schemes and ponzi schemes so difficult to prosecute. Victims are often so traumatized, they go into denial mode, afraid of revealing amount of their losses because they somehow believe they can get the money back, which only opened them to reload schemes.

In fact, half of ponzi scheme victims attempt to recover their losses through the courts, according to a group that specialized in financial recoveries. The victims instead chose to either walk away (I don't want to talk about it) or negotiate with the scammers (I think they can give the money back, if I can just talk to them...)  That's right, HALF of the victims don't want to talk to the police.

Same thing happened in the Pigeon King Ponzi in Canada, with Arlan Galbraith scammed a lot of simple farmers (Mennonites, Amish, etc.) in both US and Canada out of millions buying "pigeon breeding stock".  When Galbraith was blacklisted in multiple US states, he declared bankruptcy, and got the whole thing tied up in courts, and victims don't want to go public because they were afraid of jeopardizing their potential money as a creditor in the bankruptcy. It took an investigation by CBC TV to prod the RCMP into an investigation, and that took another year. The end result is Galbraith did go to prison... for a little while, after taking in 45 million. Even today, according to NY Times, "Even a few of his victims weren’t sure whether he meant to con them. ". 

Yet another example was Zeek Rewards, a 850 million ponzi scheme that ran from 2010-2012. When Secret Service and the rest of the agencies raided Zeek and closed it and sent everybody home, people were in denial. First they claimed "it's just employee taking out some files" (it's actually SEC and Secret Service agents confiscating office files) then when the Secret Service agent at the door started to identifying themselves the next day getting the name of victims, many still don't believe they had been scammed. Rumors were flying everywhere, like "Zeek will move to Europe", "SEC didn't have a case" and "Paul Burks, owner of Zeek, was betrayed by his own attorney."   Victims refused to admit they are victims, or they were victims of the government or critics, and so on, because they don't care about the crime. They just want to make THEIR OWN MONEY back. Everybody else can go pound sand UNTIL they got their money back, and they don't care how, even if they have to keep the scam going.  

What's TRULY hideous was the conduct of certain individuals, insiders, really, who had worked for Zeek as a consultant, went on to claim that he has evidence that can prove Zeek is innocent, but he needs money from other Zeek supporters to hire an attorney to go after the SEC. It was rumored that he did manage to raise altogether about 100K and spent most of it on himself. There was no evidence, and the rest of the money went to a no-name attorney from a no-name lawfirm who filed a couple useless motions that got denied. It's just poetic justice or karma that this guy later was nailed for Federal fraud, claiming damages from a victim compensation fund that he was not entitled to. 

The point is victims of a financial fraud just want to be compensated, "made whole". They don't care by who. Any other concern like "justice" is secondary.

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