Financial Con Stories

[danibbler]

Given a recent brush on here with someone who seems like a shyster, I figure that it might be interesting for some of us to relate financial cons that we have come across, been a victim of or avoided, etc.

In my case, I've been very lucky to avoid being a victim. At one place I worked at, we used to get phone calls from "boiler rooms" where a salesman would pitch a particular penny stock/story and say that it's backed one of the Eaton family. Given their past business history that should be a warning flag right there!

The kicker is that they would ask how soon they could send someone over to collect your five grand or whatever amount they wanted. Yeah, right.

Another story is from a friend of a friend who got conned of his life savings. The con artist represented himself as this hotshot business guy, offices around the world, etc. So the victim fell for his story of needing someone to carry a large sum of cash from one location to another and they would be paid a large fee. But, the con artist needed some sort of deposit before that could happen.

The victim went to one of the bank towers to meet up with the guy, handed over a ton of money and the other guy just split and left him hanging there. No recourse according to the cops. Very sad.

Anyone else?

 

[burt-oh-my!]

Yeah, a guy once called me and said if I gave him my life savings today, he would bring double it by the next day. I gave him everything i had. He never came back!

I've done that ten times now, just can't figure out what I am doing wrong...

 

[SkyRider]

Not strictly con stories, but here are two involving stock options.

The old Royal Trust use to encourage their employees to borrow massively to buy Royal Trust stock. Royal Trust went bust and the stock became worthless. The employees were still on the hook for their debts.

JDS Uniphase employees exercised their stock options at a very low strike price and the difference between the strike price and the market price was taxed as regular employee income. Those who held on the stock suffered when the stock declined and their loss was treated as a CAPITAL loss and could not be used to offset the income when the stock was originally purchased.

 

[danibbler]

Not strictly con stories, but here are two involving stock options.

The old Royal Trust use to encourage their employees to borrow massively to buy Royal Trust stock. Royal Trust went bust and the stock became worthless. The employees were still on the hook for their debts.

JDS Uniphase employees exercised their stock options at a very low strike price and the difference between the strike price and the market price was taxed as regular employee income. Those who held on the stock suffered when the stock declined and their loss was treated as a CAPITAL loss and could not be used to offset the income when the stock was originally purchased.

You're right, not con stories. The first is just human greed; the employees took a chance and lost.

The second, I don't know the details enough to say anything nor do I know enough about the tax implications.

 

[burt-oh-my!]

In the second one, they should have sold enough of the shares immediately to finance the tax bill. If they didn't, they were effectively borrowing (from the govt) to invest.