An Expat's Nightmare - Bank Fraud

[Tekward]

Sad to see:

https://www.bloomberg.com/news/arti...-life-savings-disappear-from-mexican-accounts

$40M missing from 158 English speaking expats.

 

[audreyh1]

Why would someone put their life savings in a Mexican bank?

I know, fraud happens in the US too, but at least there are bank protections.

Oh, yeah. Shades of Madoff:

Zavala, who worked for Monex about 20 years, became San Miguel’s banker of choice by winning over expats with promises of fat returns on accounts she claimed were dollar-denominated and immune to the peso’s fluctuations. She was local royalty: daughter of former Mayor Manuel Zavala and his Texas-born wife, Taylor, an agent for Christie’s International Real Estate.

Happens over and over.

 

[tulak]

Why would someone put their life savings in a Mexican bank?

The promise of oversized returns?

 

[Chuckanut]

Why would someone put their life savings in a Mexican bank?

Way back in the 1970's I had an aunt and uncle who retired early on disability pensions. They did not get much so they decided to live in Mexico most of the year, driving up to the states every 2-3 months to visit family and friends. They moved all their money to Mexico where the banks were paying outstandingly high interest rates compared to US banks. The Peso was devalued by 50% almost over night, thus wiping out half of their savings in dollars.

IIRC, their life in Mexico did not suffer much since they never planned to permanently return to the USA, and their small monthly disability checks bought more pesos. But, they did cut back visits to the states to one a year.

Other expats found themselves stuck in Mexico with the life savings slashed.

 

[MrLoco]

These expats are either very naive or stupid or both. Reminds me of the program "American Greed" where there is greed on the part of the victim and the criminal. So these expats ( many educated and should have known better), were promised "fat returns on $ denominated accounts."


Now mind you this is Mexico. M-E-X-I-C-O. Where for decades now the drug cartels decapitate rivals and string the headless corpses on bridges. Mexico. Where the police at ALL levels are notoriously corrupt from the federal down to the local level.
Mexico. Where for decades if you are a gringo and stopped for a supposed traffic violation, the fine can always be paid directly to the officer who stopped you.


Yet, expats decide to put their life savings in a Mexican bank AND build houses in Mexico.



And then they wonder why this happened? Ok.

 

[gayl]

article stated:

Early on, his account returned 14% with stocks such as Wal-Mart de Mexico

How could that NOT be a red flag?

 

[aja8888]

If I was King of the U.S., I would make it mandatory that everyone who is getting ready to retire would have to watch 20 episodes of "American Greed".

 

[Brat]

There is now a podcast with the same title. Well worth a listen.

 

[audreyh1]

Who did the podcast. Is it on Planet Money? Been really enjoying that.

 

[jazz4cash]

Poorly done article IMO. I would’ve thought it should at least mention FDIC and SIPC insurance for comparison. It seems like several victims reporting having problems getting statements. Pretty big red flag right there.

 

[Clone]

I just contacted my solicitor in the UK- he says that the money from Nigeria has been successfully invested in the Mexican banks. Seems they have an inside track on some bundled securities that contain corporate bonds that are secured by electric vehicles that are being placed out on leases. He encouraged me to send some more money to expedite the transfer of additional funds out of Nigeria. It seems that my , ahh, distant relative there had an uncle that also had money that looks to be mine! What could possibly go wrong?

 

[brett]

duplicate

 

[brett]

There have been numerous ponzi schemes where we live. Mostly targeted at those approaching retirement or those in retirement. Many of them have been affinity frauds. Real estate, FX transactions, you name it. A few years ago we had a church sponsored condo development go down. Many retirement plans have been ruined, not to mention the health problems related to them. My daughters inlaws figure that they have to work an extra five years because of one of these scams.

It is always the same. The victims get promised huge returns, as much as 30 percent. I am at a loss to understand how this happens. It defies common sense and I believe that it goes well beyond naivete. You can't fix stupid.

Place all of my assets in a Mexican bank No thanks. Even if I lived there I would only keep a current account with a balance to cover my living expenses.

 

[Clone]

It is always the same. The victims get promised huge returns, as much as 30 percent. They are told, or it is implied that their capital is guaranteed safe. I am at a loss to understand how someone would believe this.. It defies common sense. You can't fix stupid.

I think it is the intersection of people wanting to believe in some of the fairy-tales about people getting rich easily, of certain people having access to high yielding investments that the common folk don't, that we are in the special group this time, because we deserve this, and because sometimes this financial stuff is too complicated to understand.

 

[athena53]

If I was King of the U.S., I would make it mandatory that everyone who is getting ready to retire would have to watch 20 episodes of "American Greed".

YES! And now I'm going to go look for that podcast. I used to watch it before I went to Netflix only. Some people don't understand that rate of return is directly proportional to risk and volatility. If you're promised crazy-high "guaranteed" returns something is wrong. Others (maybe a lot of the people investing in Madoff) were smart enough to know that but probably figured someone else was getting the short end of the stick.

I took a cruise in the Sea of Cortes 2 months ago- first time I'd ever ventured into Mexico- and loved it. The city of La Paz has a large expat community; I picked up the freebie "Gringo Gazette" and it had ads for insurance agents offering health coverage and some nice financial advisors who could help me invest my IRA money in Mexican real estate.

The FX risk alone would be enough to turn me off of any Mexican-peso denominated investments.

 

[Dtail]

Would one put all their money in junk bonds, probably not, so why all in Mexican Banks whose returns could be on the up and up until it goes sour.

 

[gayl]

Greed

 

[The Cosmic Avenger]

If I was King of the U.S., I would make it mandatory that everyone who is getting ready to retire would have to watch 20 episodes of "American Greed".

Hell, if we could just get everyone to watch the Frontline episode "The Retirement Gamble", I'd be ecstatic!

 

[Walt34]

Hell, if we could just get everyone to watch the Frontline episode "The Retirement Gamble", I'd be ecstatic!

If there is anyone on this board who hasn't seen it, the show is on youtube:

 

[NW-Bound]

Is this a fraud committed by a Mexican bank or a Mexican investment firm who was given the authority to move money out of the victims' accounts?

With the risks of pesos devaluation, you might lose a big chunk of your account value, but that is not different than losing money on bitcoins or Tesla shares. Losing all of it due to theft is something different.

 

[audreyh1]

There have been numerous ponzi schemes where we live. Mostly targeted at those approaching retirement or those in retirement. Many of them have been affinity frauds. Real estate, FX transactions, you name it. A few years ago we had a church sponsored condo development go down. Many retirement plans have been ruined, not to mention the health problems related to them. My daughters inlaws figure that they have to work an extra five years because of one of these scams.

It is always the same. The victims get promised huge returns, as much as 30 percent. I am at a loss to understand how this happens. It defies common sense and I believe that it goes well beyond naivete. You can't fix stupid.

Place all of my assets in a Mexican bank No thanks. Even if I lived there I would only keep a current account with a balance to cover my living expenses.

Yeah - seems like many folks just can’t resist too good to be true.

 

[MichaelB]

The US Fed just published the "Report on the Economic Well-Being of U.S. Households in 2018". (here) This is a quote from the Executive Summary:

Even among those who have some savings, people commonly lack financial knowledge and are uncomfortable making investment decisions

Given this, it shouldn't be a surprise to read about people losing their savings to financial fraud. If anything, there must be much more that hasn't been discovered or reported yet. Add foreign currency and different laws and the potential is much greater. I recall the Peso crisis of '94, tens of thousands of US expats saw their savings disappear when the currency collapsed.