And this is exactly the ugly place where reality collides with the way we wish things were. I worked for a guy once who could put together a story so plausible that someone close to you would invest way more than they had any reason to or should, into the venture. He would not tell a single outright lie and the "truth" would be that if all the things that needed to happen, did happen, the business would in fact be a great investment. He would have a sold your parents so hard that they are probably getting their friends to come in on the deal too. And when all the money was gone and your parents were destitute, he would have an iron clad story about how it was not his fault, how your parents knew that things could go wrong, and that risk was all part of the equation. He would be untouchable as far as a fraud prosecution goes.

Remember the 'startup story' we read here? [1] This CEO convinced his employees to cover payroll, you don't think he couldn't convince your mom?

I hope you (or someone you care about) never experiences a really good con artist first hand because it completely shakes your belief in humanity to the core. These people will take everything you have if you let them, and they will do it without hesitation. This is how it goes;

Your family member or friend calls you to tell you that they just got in on a really good deal. They are going to be rich and you can be too. They will tell you how this company their new friend is the owner/CEO/president of has discovered some new product/bitcoin/algorithm/process/material that is going to disrupt some multi-billion or multi-trillion dollar a year industry. They will have some really great story about either how the information was suppressed or some "unknown genius" that they befriended/are/know came at it from a completely new direction and the world was going to change overnight. They just need some money to get their first prototype demonstrable and bam the value of your investment will grow by 100x easy.

Now you ask them about it and find a lot of things that you find suspicious so you ask them to ask questions. If the questions are too pointed the prankster will threaten them with not taking their money (and so losing out on this huge reward) and if they have bought the story they will shut up. The trick here is they think they are already rich because they are convinced it is such a sure thing. And no amount of reasoning from you will change their mind.

When it finally is revealed that the money is gone and the "company" is shutting down, there will be a set of things that happened that appeared to be either extremely unlikely or extremely rare. In one story the "technical cofounder" who had all the secret sauce in their head was killed in a freak car accident in Russia while visiting their family to bring them back to the US.

The crowd funding site will be set up with layer after layer of warnings that you can lose all your money, and there won't be a single shred of printed information that could prove that the people responsible didn't believe what they were saying when they convinced your loved ones to invest.

Bottom line, you won't be able to prove fraud, people you care about may have had their entire life's savings taken and are now living in poverty on government benefits, and there will be nothing you can do about it.

The only things that stands between these fraudsters and your grandmother are the Qualified Investor rules.

[1] https://medium.com/startup-grind/i-got-scammed-by-a-silicon-...