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Is Bitcoin a Scam? Scam-Proof Your Assets

Scam-Proof Your Assets: Guarding Against Widespread Deception, my newest Rich Dad Advisor book in several years, was released near the end of 2020. Cyber criminality is everywhere, costing people not only financial losses but emotional damage as well. You must be vigilant.

To learn the protective strategies you need against the cyber onslaught you may purchase the book from the RDA Press website.

I couldn’t fit all of the scams into Scam-Proof Your Assets. So the following excerpt isn’t in the book but is important for you to know.

While some frauds become harder to perpetrate due to better oversight, others become easier thanks to technology. One type of fraud that didn’t even exist just a few years ago is that involving cryptocurrency.

To illustrate what this is, let’s establish right now that currency is something that at least two parties agree has value and constitutes a type of payment. It’s a unit of exchange. When they taught real economics you would learn this. If I hold a dollar bill out to you, you see that as valuable because you can use it to buy things. We agree it’s money, so it is. Each dollar bill has a serial number on it, so according to the Treasury Department, that serial number represents legal tender in the amount of a dollar.

Well, in the case of cryptocurrency, a series of numbers—a sort of cryptography—represents an agreed-upon value. That series of numbers is currency, and it’s used to conduct transactions online. And like money, which the U.S. Treasury only produces a finite (albeit inflated) amount of, there is supposedly a finite amount of cryptocurrency. Promoters claim it is a finite amount but there is no intermediary—say the U.S. Treasury or a bank—to authenticate the value associated with that number. So in cyberspace it has value, but elsewhere, it’s a toss-up. You can’t go buy ice cream with it. Its price volatility is very high, making it unreliable. And it’s not a thing you can see or touch. It’s ideal for criminals.

The biggest and most well-known type of cryptocurrency is Bitcoin, though there’s no stopping anyone from creating their own cryptocurrency. In recent years, there are more than 1,500 of them, with more on the way. Because cryptocurrency is just a series of numbers, and because numbers, despite all claims, can be infinite, there’s no shortage.

Without certainty, but subject to animal spirits, the corresponding demand and value go up and down. Certainty arises when the two parties using it to buy and sell things agree on its value. So investment in Bitcoins or any other cryptocurrency is speculative at best. It only has value if people continue to want it and see it as valuable. The jury is still out. For all those who believe in crypto, that is fine. Go ahead and take down the Fed. But, for the rest of us, keep your guard up!

Bitcoin isn’t a scam—whether it has value or is useful is for you to decide. But what is a scam is when some fraudster throws out a lot of technical jargon and makes cryptocurrency sound like some unconquerable wave of the future. They claim they have some special insight to forecast a huge rise in cybercurrency, that it will eventually be the currency. In other words, for all its futurity, it is just another age old big pump-and-dump scheme. In December 2017, that’s what happened. Scammers intentionally pumped the value of Bitcoin so they could solicit investors, inflate the price up, then unload the ‘coins’ at a much higher value.

And many small investors fell for it, dumping all their money into it. Dipping a toe in is one thing, but pouring all your money into one investment is rarely a good idea—even a commodity you can actually see and use and has value. More on this subject in the book, Scam-Proof Your Assets.

In early 2017, Bitcoin’s prices went from under $1,000 to nearly $20,000 by the end of that same year. But then the market fell 80 percent, devastating investors who lost millions.

That hasn’t stopped scammers from plaguing Facebook with Bitcoin ads promising riches to savvy investors. In January 2018, Facebook instituted a policy banning Bitcoin and other cryptocurrency ads, but then later it relaxed those rules, allowing pre-approved advertisers to use its platform for these purposes, priming the pump yet again for a surge in cryptocurrency.

It bears repeating: Bitcoin and similar currencies have little, if any, actual intrinsic value, making it a prime target for crime. In fact, William H. Harris, Jr., founder of Personal Capital Corporation, a digital wealth management firm, reports that about 90 percent of all remote hacking is focused on Bitcoin theft by taking control of computers to mine their coins.

In 2019, a Ukrainian firm scammed $70 million from elderly investors in Britain, Australia and New Zealand. The company’s online ads featured interviews with celebrities such as Hugh Jackman and Gordon Ramsey who supposedly made a killing in crypto. High pressure salesmen in Kiev promised extraordinary returns. And the money all went down a Ukrainian rabbit hole.

“In what rational universe,” Harris writes, “could someone simply issue electronic scrip—or just announce that they intend to—and create, out of the blue, billions of dollars of value? It makes no sense.”

As Keller points out, “I get the idea that some of these ‘Bitcoin funds’ actually own no, or very few, Bitcoins, but are simply the next wave of Ponzi schemes. It’s actually a Ponzi schemer’s dream: Something that most folks don’t understand, but are being led by media buzz to believe it is the next big thing … Note to file: Nothing that you don’t understand is likely to ever turn out well.”

Scam-Proof Your Assets covers the many threats we face from cyber criminals. Everyone needs a guide book against deception.

Scam-Proof Your Assets

Are Reverse Mortgages a Scam?

Scam-Proof Your Assets: Guarding Against Widespread Deception comes out in October. It is my newest Rich Dad Advisor book in several years. It covers the very important issue of cyber criminality now harming all of us. The monetary losses are staggering. The emotional damage is disturbing. Email, internet and telephone scams take our assets. You must be vigilant at all times.

Scam-Proof Your Assets also argues that the government must take greater action to end this crime wave. You can help. Buy the book from RDA-Press.com by clicking below.

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I’ve covered so many scams I couldn’t fit all of them into Scam-Proof Your Assets. So the following is an excerpt that didn’t make the book, but is important for you to know.

Home Equity Conversion Mortgage Scam

First, a home equity conversion mortgage is an actual, legitimate type of mortgage, one type of what’s known as a reverse mortgage, and some say they can be helpful for seniors. Whereas in a typical mortgage, you take out a bank loan and slowly make payments until you’ve paid it off, a reverse mortgage, like its name suggests, works in reverse: The bank pays you all the money for the house—in a lump sum, in monthly payments, or through a line of credit—so your debt grows rather than decreases. You can’t really pay the loan back until you sell the house, with anything that might be left over going to heirs. Reverse mortgages are often promoted to seniors as a way for them to afford life in their later years. Family members left behind can then sell the home once the elderly owner has passed away and pay off the debt.

According to HUD, HECMs are the most common type of reverse mortgage, and it’s the only type that’s insured by the Federal Housing Administration. In this scenario, the homeowner is able to take advantage of equity earned in a home. The maximum loan amount of about $680,000 is available to a homeowner aged 62 or older who lives in it as the primary residence. The homeowner must have paid off the home or at least paid a significant portion of it. Terms are available at fixed or adjustable rates for a period of time that may be selected by the homeowner. The reason it’s endorsed by the government is that the homeowner doesn’t have to start paying on the loan until he or she is no longer living in it as a primary residence. Also, the loan involves FHA mortgage insurance that guarantees the owner or the heirs won’t have to pay more than the value of the home, even if that amount is lower than the loan amount.

But it’s definitely not a low-risk mortgage, which is why anyone considering a reverse mortgage of any sort has to go through mortgage counseling. It’s not a decision to make on the spur of the moment during a time of financial hardship. But scam artists and unscrupulous mortgage and financial insiders know that HECM’s are legitimized by the U.S. government, and they take advantage of this fact to con seniors who are concerned about making ends meet without a salary. This is a particularly easy sell because the terms of reverse mortgages are hazy at best to most people, so it’s easy for con artists to gloss over the important details.

Even though they may not blatantly be attempting to steal money, business people hungry to sell reverse mortgage products may use high-pressure sales tactics to sell the product to homeowners who aren’t a good fit for it. The Wall Street Journal actually says that the majority of these scams are perpetrated by people the victims know, such as financial advisors.

Reverse mortgage scams include the following:

  • The fraudster may take out an HECM without the homeowner’s knowledge in order to obtain the loan for the value of a home that the homeowner is now responsible for paying. Often this is done by relatives of seniors who are preying on their neediness and abusing their personal connections. They may take the monthly payments and keep some or all of it themselves rather than give it to the homeowner.
  • Obviously, those taking out lump-sum loans are at greater risk of scams. Some scammers find out who is opting for a cash-out reverse mortgage, in which the total value of the loan is taken as a lump sum, then fraudulently take the money or transfer it to a personal account. This can be done by an insider—for instance, a mortgage broker or relative, who endorses the check and puts it in his or her own account. Then the person may explain that the borrower has to go through this person to receive the money. The scammer only distributes a portion of the full amount and keeps the rest for him or herself. In one Michigan case detailed in a report by the Consumer Financial Protection Bureau, a loan officer directed the closing agent to write two checks: One to himself for over $42,000, and one to the actual borrower, for just over $61,000. In the end, the borrower was left with a balance of more than $131,000—nowhere near the amount received.
  • Some scammers convince reverse mortgage recipients to invest those loan dollars into shady schemes, promising they’ll double their money and preying on their desire for financial security or wish to leave money to their heirs.
  • Some crooked loan salesmen may offer reverse mortgages as “free income,” when in fact a mortgage isn’t income, it’s a loan payment, which is why it’s not taxed. This type of pitch cleverly hides the associated fees as well as many of the terms of the loan, such as the fact that the homeowner still must keep up the property and pay the property taxes each year. Other tactics suggest taking reverse mortgages as a way to delay Social Security benefits until 70, despite the fact that the CFPB found that the costs of doing so always exceed the cumulative savings created by delaying retirement benefits. Or they may create straw buyers in order to purchase distressed properties, convincing unwitting seniors to “purchase” the low-cost properties by taking over the deed without exchanging any money. Then, in this too-good-to-be-true scenario, the homeowner is convinced to take a cash-out reverse mortgage based on inflated appraisals, and the scammer makes off with the loan amount.

Reverse mortgages are a calculated risk that should involve insights from numerous professionals. Be sure, before considering any such option, that you speak with a certified HUD housing counselor and consult Better Business Bureau reports regarding any mortgage broker or lender. Of course, don’t believe anyone who claims to be able to offer you a home—or money for your home—with no strings attached. There are always strings, and they may be really pricey ones.

Scam-Proof You Assets: Guarding Against Widespread Deception covers the threats we all face from cyber criminals. It can be found on Amazon.

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