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Utah: fraud capital USA. Déjà vu all over again?

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Once again,* Utah is labeled the fraud capital of the U.S.

According to Ponzitracker.com, despite ranking 31st in population, Utah had the sixth-highest number of Ponzi schemes from 2008 to 2018, which is likely attributable at least in part to the state’s large Latter-day Saints population, which has been a hotbed for affinity fraud.

In affinity fraud, scammers are members or pretend to be members of the same groups, such as religious or ethnic communities, language minorities, the elderly and others.

Salt Lake attorney Mark Pugsley found Utah had 1.35 Ponzi schemes per 100,000 people. A distant second, Florida had 0.51 per 100,000 people. Utah residents were cheated out of $1.5 billion in those 10 years. If all other scams were included, Pugsley says, that adds $500 million more in losses for Utahns.

Utahns: too trusting or too gullible?

On Friday’s JayMac News Show, Ethan Millard and Todd Fooks examined this question.

“In our community, it’s a positive thing to give and receive trust quickly,” said Millard, who works in finance and has a securities license. “That’s part of our unique cultural makeup. And that’s not going away. That’s where our vulnerability is.”

“We’re especially vulnerable to people who prey on our loyalties,” Fooks added. “Essentially, you’re being nice and that’s one way you get caught” by a scammer. “You’re doing it as a favor” for this person who betrays the trust.

How do Utahns guard themselves against fraud?

Millard, who helps people invest every day, has some recommendations to follow:

  • Stick to reputable companies in the public market.
  • Go through a well-known bank or brokerage.
  • Don’t write a check to an individual person.
  • Get a second opinion.
  • Don’t invest privately unless you have millions to spend.
  • Pay a lawyer to do the due diligence.
  • Don’t take the risk unless you can afford to take the loss.

“And if the person asking you to invest can’t provide the documentation to your lawyer, run away.”

It’s possible to make a lot of money, he said, but you’ve got to protect yourself, so invest in the due diligence.

“It’s going to be hard writing that check [for an independent, due-diligence expert], but you could save yourself your life savings.”

* The Wall Street Journal named Salt Lake City the “Fraud Capital of America” in 2015. *