When someone lost all their money to a scam, you’ll never believe how they recovered 90% of it thanks to one weird legislative trick!

by worstideas

Background:

Financial scams come in all shapes and sizes, ranging in nature from “unbelievable” to “completely hilarious.”

But, it’s rarely hilarious to the scammed person! And even people who haven’t fallen for transparently obvious scams can be affected, as relatives are often are on the hook to keep their loved one from starving on the street post-scam.

The issue:

So we’d ideally like to reduce the number of scams that separate people from their worldly possessions. (This only applies to financial scams, and not, for example, “lose weight instantly with this one weird trick!”)

Right now, scammers operate in a realm of fantastical results where they don’t face any competition. For example: “10% returns on your investment, every month! Guaranteed to not lose money!” These claims are necessarily far superior to the claims made by legitimate investments.
Proposal:

We would like to add more competition to the scam-space by sanctioning a certain number of officially-licensed scammers.

Thus, instead of having 100 legitimate businesses offering “1.5% investment return per year” and one scam business offering “35% return every month!”, we would now have the same 100 legitimate businesses, but 100 new scam businesses that would offer a variety of unbelievable returns.

So far, this only makes the situation worse—but the crucial difference is that these new “official” scammers would have to abide by certain rules, and would have to return a certain fraction (say, 90%) of scammed funds to their marks.

percent-100Fig 1: Before the proposal: 100% of scammed funds are stolen by unscrupulous scammers.

Details:

A prospective scammer can register with the government for a “scam license.”

Possession of such a license immunizes the scammer from prosecution, as long as they follow these rules:

  • 1) Properly document all financial transactions
  • 2) Hold on to 90% of the scammed funds for each scammed individual.
  • 3) Return this portion of funds when they are (eventually) “called” on their scam.

Additionally, in order to keep these scammers from competing with legitimate businesses:

  • 4) The official-scammers must make outlandish claims of returns so as to not be mistaken for a legitimate investment. These would be specifically regulated (e.g. “Promised returns must be at least 5x higher than this year’s best-performing ETF on the NYSE”).
  • 5) The scammers must claim to compete in an existing market, to prevent scammers from poisoning innovation by making any new high-returns market immediately appears to be a scam. So “we have one weird trick for flipping real-estate and guaranteeing 200% gains” would be OK (real-estate flipping is an existing market), but “We have a secret plan to mine asteroids and earn a billion pounds of gold” would not be (asteroid mining is not an existing business).

percent-90 Fig 2: The licensed “official” scammers can take 10% of scammed funds, and must return 90% to their overly-credulous “investors.” Red portion of pie chart represents the stolen funds.

Conclusion:

These new officially sanctioned scammers might be able to lure gullible “investors” away from real scams, and cause them to only lose 10% of their money rather than 100% of it.

Although it’s possible that people would fall for multiple scams in a row, it would still be preferable to lose 10% of funds each time rather than 100%.

 

PROS: Reduces the number of financial scams by providing additional competition for those scams. Provides additional sources of employment for ethically-flexible employees in the financial sector.

CONS: Would remove sources of income from scammers, who presumably occasionally also have families to support. Cry a tear for them!

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