Don't Be A Victim: How To Spot Scams Before They Happen Ep 74
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From the art of the deal to keeping it real. Live from the Simply Vegas studios, it's The Power Move with Jon Gafford. Back again, back again, back again in 2023, boys. Happy New Year. First show of the new year after a long hiatus, if you will. I mean, you know, long, couple weeks, whatever it was, the holidays. Good hiatus. Yeah, you got kids, you got stuff to do.

welcome to the power move my name is John Gafford I am your host this is the show where we talk about things that make you better ways to hopefully help you improve to my left as always we've got the Bulgarian Mongoose polo what's up everybody hopefully the new coach for the Raiders the new yeah I couldn't do worse you know what I was in Utah some guy came up to ask me for my autograph

Mike, huh? He thought I was a Miami Dolphin coach. Mike, yeah, I'd be in Utah during NFL season. Week before the major finals. Just kicking it in Utah to hang out. And across from us always is the counselor, Chris Connell. How are you, sir? Living the dream, gentlemen. Living the dream indeed. Living the dream. You know, man...

Lots to unpack, lots of stuff going on. Lots going on. You know, I got to tell you what. Today what we're going to talk about, I've decided what we're going to talk about. Because as I work out, as I'm in my gym at my house, I normally tend to try to binge things that I start watching only when I'm in the gym. So it forces me to want to go back in the gym again to watch them again when I'm doing that. Schitt's Creek. And right now I'm watching the Bernie Madoff story. I was going to say that. Madoff. Have you seen it? Madoff, the monster of...

of uh wall street and dude holy smokes if he not smart he was not smart from the beginning no i thought he was an intelligent guy like that just got greedy no he was not smart it just it just he just started it before he was it was one of those things where he started when he wasn't uber successful and it just kept going but but what i want to talk about today is the mother is among other things how to hopefully detect when you're getting scammed i mean you know there's

There's so much of it out there right now and so many things. And I just, I think about this and like my mom calls me that. I don't know if I told you guys about this. Did I tell you about this? Yeah. When my mom calls me. Yes, you did. Yeah. She calls me. Did I talk about it on the podcast? Not on the podcast. All right. My mother calls me up and she says-

I'm at the bank and I felt the need to call to you and I said, okay, tell me what's going on. And she goes, well, I was on my computer and I was, I was on the computer doing computer things. And all of a sudden this notification, I'm going to go in my mom's voice. Now this notification from Microsoft popped up and my computer had a virus and it told me to call this number. And I'm so glad I did because when I called them,

They told me that not only did I have a virus, but someone had stolen my identity. - And they were the IRS at the same time. - Yeah, they verified it. So they told me I had to come to the bank, and I was going over through everything, and I had to come to the bank, and I had to go to the ATM and deposit this money.

in a certain way. And I just, before I do, I'm like, mom, the, as soon as she opened her mouth and said, like, like you had me at, at pop-up screen, you had me at pop-up screen. And she's like, well, it said Microsoft. And I'm like, because if it said Nigerian scamster, you probably would have tipped you off there as to what was going off. And dude, it is, seems like it's everywhere. And when you look at in business, like we laugh about stuff like that, like, oh, it's so, you know, out there who would fall for that. But

Business. I get...

Once a week talking to someone. I mean, you just made a story this morning. It's like, wow, scammers out there everywhere. Well, like you said, I constantly get emails from people saying, hey, will you do a purchase agreement for heavy equipment in your jurisdiction? Now, the minute it says your jurisdiction, I go, mm-hmm. But anyway, there's a scam, and what happens is this. Lawyers have done this, and they've been burned out. Lawyers, law firms have been burnt on this scam. Smart people. Where you get a check from a client.

As a retainer, they pay you, a retainer. By the time it doesn't clear with your bank- You've wired it back. You've wired it back. Oh, this is done. Can you wire it back? Okay, yeah, sure. It was here. It looks like it cleared. Wire it back. Money's gone. It was never real. Yep. That happens a lot with real estate because it's the same thing where they're like, people are like, I don't understand the scam. These people that email you like, I love it when it's the-

I'm interested in purchasing a home in your area. Are you still in the business of selling them? Okay, dude. Yeah. Like I know immediately. Kind of something I do. That's your general area. Not specific, just what it is. And, but when you watch the Madoff thing, man, if you haven't seen it yet, what was so amazing about it was he did such a good job of becoming insulated from the SEC, right?

Like to the point when they would come in and investigate him, right? He would berate the agents and be like, I already talked to your boss about this. Like, do you know I'm on the short list to be your boss? Do you understand that? And they would like call their boss and be like, oh, maybe you can be his aide, but he takes over. And they would just kept closing the investigations over and over and over. They just kept closing it because he made himself so difficult.

Singular insulated, but it's amazing to me. Here's the amazing SPF did that at 50x exactly it is but it amazes me that all of these people that have all the money in the world and you're talking about every royal family basically across Europe you're talking about every major money manager across Europe in the United States they all Not just had their clients money with this cat had their own money. I

And like, this is the business you're in and you can't tell that you're looking at a chart that is up and to the right at 45 degrees over 12 years and something's wrong. Yeah, you didn't notice that no one else is doing this? Yeah, that nobody else can do it. And it was crazy to me. So there's this guy over, his name is Bill Miller of Legg Mason. He's a legend in the mutual fund space. Legend for 20 years he beat the S&P. 20 years. And that's one guy.

And I know his name, and he's just a mutual fund manager who lives in Boston at a company called Legg Mason. That guy just slightly beat the S&P by like a percent or two. Yeah, yeah, yeah. I mean, he's the Mike Tomlin of mutual fund investors. Just enough to keep the job. Just enough to earn your MERs, your management expense ratio and fees. So when I see these guys that go, oh, I'm a hedge fund manager. Oh, yeah, we're making 45% a year. Mm-hmm.

I immediately go, you don't know what you're talking about. Now, there's a year where a hedge fund manager will make a 45, right? Yeah. But if you tell me you've done this for five years. Every single year for 12, 15 years. You are a liar. You are a scam artist. There's no way. 100% of the time, that's true.

Yeah. Well, that's one of their biggest competitors. He goes, recreate what he's doing. It's not possible. Like they wouldn't have done it. It's not possible. They have MIT PhD physicists running every single possible permutation, probably now John's favorite thing on earth, AI, running. The quants running it, buddy. The quants running it, AI running it. These people down to a fraction of...

you know the arbitrages come in you know microseconds now where they're taking fractions of a penny just multiple times these people have this down to a degree where it's no longer art that part of its science well let's you know what speaking of ai let's talk about that for a minute because i think that is going to 76ers best point guard

ever i agree i agree with ai um no no we're not a sports again we're not a sports show we're not a sports show no the greatest thing in the history is is now ai well until it you know turns on us and then we're you know we go full skynet and then we do that but you know the chat about ai if you haven't got on it yet i am i'm just addicted to everything ai i'm using it every day in my business i use it every day for things and everybody i show it to is just

Mind-blown within within our world and if you haven't seen it yet, it's the chat GMT It just got in 20 I think it's these are 27 or 29 billion dollar valuation on investment is what this thing is worth and

And essentially, if you don't understand what AI is, or you don't understand what it does, imagine having the entire wealth of human knowledge, which is the entire internet, as your brain. - Or Chris. - And you can remember everything. So pretty much Chris. And you have that going on in your head and you can instantly produce stuff. - Did you see the guy that, oh, sorry. - I gotta back up a little bit in the story here. I gotta back up because one of my examples is great.

I am using this to write all of my blog posts. I'm using it to punch up copy that I'm writing, but there's no copy that I don't write. For example, I can go in, you know, everybody's looking for social media stuff to do and everybody wants, everybody wants social media content. Like I don't know what to write. You can just ask this thing to write you either a video script or anything on any topic and it will spit it out perfectly. You can ask it to write you 20,000 words on anything. It'll spit it out.

Now, obviously as quick as, you know, as quick as something forces for good come up, there are forces for evil. You didn't see already over the weekend, some Princeton guy, some Princeton kid decided to get his ass kicked by every fraternity in the world by creating a program that detects if your homework was written by an AI bot. So sorry, sorry, college kids. That's out the window. Thanks nerd. But, uh, but anyway,

I'm using it for everything, but just to show you the power cult of what it'll do. So me and Connell, you didn't come, but me and Connell were at a networking event on Thursday. And we went, and it's always an eclectic group. It's my buddy Sean has this group, and it's always super eclectic. It's everybody.

so i look over how were they this time it was good it was good it was good no no no okay it was good i was uh dry i'm not drinking you know doing dry january till i go to austin in a couple days and uh so just me standing in a bar well people have to get out there be like three people now because of the way those guys have their money invested

- Oh, you know, I don't think any of those guys are even crypto anymore. But anyway, is that still their thing? - Well, here's the thing. There's too many people on this now 'cause now it says it's at capacity. I can't even get in to read what it was. But anyway, we're standing at this event and we're sitting there. And Chris is talking to somebody else and I'm looking over and he comes over and says, "Hey, you know who that was?" And I go, "Who?"

And it was somebody, and keep in mind, this weekend in Vegas, we had two of the largest events that happened in Vegas. Do you think they purposely have them simultaneously?

It's gotta just be dripping with money. So yeah, you have CES, which is the Consumer Electronics Show, which is monster. It brings in so much money and it brings in a highly male demographic. - The same kind of nerds busting other people for using the iBot. - Yeah, busting other people for using the iBot, right? Brings them in, but it's also got, we also have the AVN Awards, which is the Adult Video Network, whatever, network awards, where all the porn stars come in.

So as we're saying, you guys didn't come to support me on my win, but right now meet me either. Um, I won what, what at the Avianna awards, which, which, but here's the question. What's finished the joke? Finish the joke. What award? What did you win for? What did you win for Colt? Finish the joke. You don't just win. See now he's on the spot.

Nope, never mind. Yeah, see you. Joke on bad. Joke on bad. Joke on bad. Joke on bad. Best power bottom. C-S. C-S. Best power bottom. Best.

Oh, not that there's anything wrong with that. It's still a category. It's a category. I assume. Anyway, so Connell looks over at me and goes, do you know who that was we're talking to? And I go, no. And he goes, Sophie D. And I could tell from the name it was obviously a porn star. It's very prolific. I could tell. How do you know who that is? Well, hang on. 15 million followers. I don't know how you don't know. I'm like, I have no idea who this person is, right? And I didn't. I had no clue who they were. And...

So anyway, it became this thing where it was like, whatever. So I come home and I'm using the chat bot.

to write me soliloquies about Chris Connell's immense porn knowledge that I'm texting him. I feel attacked right now. No, it was hilarious. I'm using it. I'm like, write it like a Shakespearean sonnet. But it was spitting out. Let me see if I can find it. I might have texted him. Did you see why you're looking outside for us? I don't know why. I think this is funny. So this person was talking and saying, oh, yeah, this person, 15 million social media followings, one of the biggest, you know, old fans, whatever. Here we go.

Oh, where to begin in describing the vast staggering amount of knowledge possessed by Chris Connell on the subject of random porn stars. His mind is a veritable treasure trove of information on these lascivious, lascivious, lascivious, lascivious. I don't know why they're left. Each one more obscure and obscurely learned about than the last. Chris could discourse at length on the favorite sexual practices.

of any number of exorbitant actresses reciting their filmographies with ease and aplomb of a bard recounting ancient legends. So it truly is encyclopedic knowledge of all things pornographic.

is a sight to behold. How many sentences did you put in to get that? No, I just wrote, write me a paragraph. It sounded like that kid who got a thesaurus. Yeah, it is. And just put everything together. Then I said, write it like Dr. Seuss, and I didn't say just that one. That was hilarious. But yeah, I mean, literally, this will do anything. Well, did you see the...

The pimp goes limp. No. Did you see the company that's trying to get somebody to give them a million bucks and let them have a case? Somebody defend them in court? AI defend them in court? Yeah. Oh, I saw that. At the Supreme Court level. I...

I guess they did it once for a DUI and they're like, well, that's not hard. But here's the thing. I mean, is that, I mean, you have the wealth of knowledge if it can disseminate what's being said. I wouldn't really call a porn star a Lothario. No, not important. I want to talk about that. That's the problem. Screw up. You're like, you're like, it sounds like that kid who's like, um, how's your day going? Oh, it's very cromulent. It's just so out of context. It just sounds like a bot. Now, now you know what it's like for us to sit here and listen to you half the time.

But we don't know if you're saying it right or not. Yeah, we just nodded. But when you know you're saying it wrong, it's a different dynamic. I think you should just start doing that just to screw with us. It's funny, though, that I was sitting there kind of shocked that John didn't know. First off, in my defense, that person I've seen in multiple social media pictures with people, including my neighbor. Okay, got it. So I'm like aware of who that is. I'm like, oh, that's...

because it's very it's very distinct don't don't stop trying to dig yourself out john pull her up let's look at her just no instagram where i don't know i i told you i want to see your face no i told him i said i pulled her up and i you know i pulled her up and i didn't i didn't go deep in the catalog but i perused the top of the hits and i was like i've never seen this person i don't know this person sounds like i already follow her

I'm already subscribed. So anyway, detecting fraud.

But here's the thing. Here's the thing. Even now, you look at it this way, and we all get these messages, and you're already getting them. And you get the, hey, is this Bill? Hey, is this Mike? Which in our text message group, we take great pride in screwing with the bots to the point when the human gets on. That was a good one. Yeah, solid. That was a great one. But yeah, when you get on there. But how many people don't? And as this stuff gets smarter and smarter and smarter, I'm going to have to put a beeper on my mom's ankle to keep her from going to the bank. Hey, Mike.

No, it's scary because we're fooling their money. Yeah. I mean, we get it to us so many times and we laugh because we go off on it and we make it a fun thing, right? But it's working. If it's getting hit that many times, it's working, right? Have you ever watched Scammer Payback? This guy named Pierogi. Is this the guy that takes over their computers at call centers and wipes them out? Yeah, Scammer Payback, Pierogi. I love watching his show. That's great. You know, it's not like that. It doesn't.

But they've taken some of these buildings down with it. And with the help of Mark Rober from...

The engineer guy the NASA scientist is the fart bomb So mark Rober and them they've all linked up together and they've shut some of these call centers down by by infiltrating them I love that awesome. Yeah, so they're that people are aware of them They prey on old people who don't know any better who just want to do the right thing But I would say I would say it's it's not there There's a whole old person department here, but the old people want to do the right thing. I follow rules. I agree. I agree. I think I

i think if you're an old person right you just got to question everything and don't and don't and always you know call somebody call somebody you gotta you gotta call somebody but i think this is there's so many people that get scammed get scammed out of money look at the made off people they weren't old people there's these are these are some of the smartest money managers in the world so

I think for me, the step one is never make any type of a financial decision or do anything that involves money when you are in any type of a bad place. I think if you are in a desperation spot, I think your lens is probably not objective enough. Fogs.

To make decisions with your last, it's like in poker, right? You go on tilt. You lose a couple hands, you go on tilt, you start throwing them all in on nothing. You're chasing it. Right, you're chasing it. And I think a lot of people do that too and they lose money. And I think that's what you see like especially in like the real estate space, right? Mm-hmm.

There's always people that you know want to raise money and their fundraising and the deals aren't real and the paperwork's not good And you know they end up losing money because I can tell you the biggest problem in real estate investing right when you deal with and it's everywhere now and it's crazy when you see How many people are in the real estate investment space that are not licensed are not governed by anybody will tell you anything and quite frankly a lot of the people that I meet are

or have been around or exposed to in the real estate investment arena, all right, are people that are not highly educated. - We've talked about this. - Yeah, they are blunt instruments that are like, if I just bang, if I go door to door on 250 of these empty houses, I will find one and skip trace somebody that'll sell it to me at 60% of market value.

And then they go out and then they try to raise money to do the deal. And I'm in groups where it's all day long. People looking for, hey, I'm looking for a partner. I'm still looking for a lender, looking for a lender, looking for a lender. I have the deal. I have the deal. I'm looking for a lender, looking for partners. And the problem is, where these guys get in trouble, this is where they get in trouble, is they start doing more than one project. And then they start robbing Peter to pay Paul. And how that works is like, because a lot of people don't understand when you invest in real estate, especially if you do fix and flip, right? If you do fix and flip, well-

When you do fix and flip, part of your loan, when you acquire a loan, a fix and flip loan, is they say, okay, we're going to loan you 70% on the after repaired value of the house. That's what we're going to give you, okay? And then we will hold back in escrow the amount you're requesting to do the repairs. Let's say it's 40 grand.

So what you do is you do some of the work and then you submit pictures to the lender and say, look, I've got this much done. I've got 25% of it done. Send me 10 grand. And then I got half of it done. Send me the other 10 grand. Have three quarters done. Send me another 10 grand. Hey, everything's done. Send me the last 10 grand. But what a lot of these guys will do is they will get short. They'll start using the rehab money

to maybe fund their next deal. Say they need $10,000 to close a deal or to do EMDs. They'll be like, oh, I can take this money and instead of paying the contractors or putting it actually into the house, I can do this. So they start trading on the rehab money. And that's where you see guys just get absolutely smoked. Now, if you're somebody that has invested in one of these deals and that's happening, you have a real problem because they could potentially lose

run out of money just like made. I mean, it's essentially kind of a Ponzi scheme when they're doing that because essentially over leveraged. Well, it's not over leveraged. But when you sign the agreement with with those lenders, you're saying I will use these funds for this property. You're not supposed to use them for other things. Now, they have no idea once they send you the check, if you pay your contractor or what you do with that money.

When you start bouncing that money around, it creates the need to all of a sudden you're like, oh shit, I'm short. So the only way I can get good with this is to buy another property with another deal. Yeah, the only thing about that that's different is a guy in the investment space says, I'm returning 35% a year

- You know, like on the fix the flip, yeah, people over leverage themselves by taking on too much, right? - Yeah. - They get too in deep. That's why most new businesses fail. They're too successful too quickly and that creates a cashflow issue. So they don't have the cash to pay for replacement inventory, for example, right? So they have all these orders. So it's always important to have a credit facility that you can work with, you know, in the event that that happens, right? For the positive reasons. People don't, they come in under capitalized and they don't understand. And like John's saying,

They just see this money as theirs, whether or not it is matured yet, whether or not they're entitled to it yet. Right. There's a lot of money I have in my bank account as a lawyer and trust. It's not my money. Right. A third of it might be. Right. Yeah. But I haven't earned it yet until they get their two thirds or whatever. Right. So that's not my money. I've never once looked at my trust account and went, look at all this money I have in my account one day.

Money is mine when it hits operating. The problem is people go and buy Rolex with that money. It's crazy. It's not that they're funding it into another thing to make it. They're buying a car, they're buying Rolexes, they're buying whatever. I tell people all the time, I mean, this last week, I've met with three different investors last month, like 10, right? And they're like, well, I can do this. I got this guy. I go...

Take the last 10 years of track records and throw it out the window. Cause I could have taken a piece of shit and it would have gone up 200%. Sure. Like it's, there was, there are so many uneducated. That's what, you know, I've been approached to do funds and I'm like, so wait, so what's the, and here's the thing. I think the problem there is most people that are running some sort of an operation that involves running, raising money or raising capital or taking on partners. They haven't,

For them to be able to pull off getting the investment for them to be able to pull off like I'm I'm good enough for you to invest in they have to have a certain level of unwavering confidence Yeah, that lets them think Bernie Madoff never thought that was gonna fall apart No, it never even occurred to him. It would fall apart, right? He thought he thought he'd been one. He insulated his kids. He insulated everybody from it He thought he would die and it would just go away

That's what he genuinely thought. That's why he insulated everybody from that business. That's why he didn't set up a succession plan. That was his whole idea. But when you have that unwavering confidence, you know, that's when you get like, like a friend of mine is having a problem right now. They have several different companies and you got into that. Well, this company is going to loan somebody to that company because I don't want the partners of that company to know that we're not doing well.

So now all of a sudden thinking that he would just pull it back together and then this will come back and say, bro, this is a mess. Like you can't like if that company, if this company over here is not doing well, you got to tell the partners it's not doing well. And then you've got to do a capital call on it or it folds. You can't prop it up with another company. You can't do that. And as we were having this conversation, I was trying to help him through that. It was like.

Is that somebody that I know? This is a mess. No, it's somebody you know. But I was like, this is a mess. And I was like, this is somebody that called me and was like, can you help me? Luckily, the person that you know that called me. Yeah. Did I tell you about that? No. A friend of ours called and just said, look, you know, and this was the right call that he made to me.

The person that you know called and said, he sent me a text and essentially just said, hey man, I did 10 million in sales last year. I just don't know how to financially run a company. - Yes, that guy. - That guy, right. But that was the right call. - That's a good call. - And I helped him with some stuff and I followed up with him the other day and I said, did you get yourself sorted out? He said, yes, I did, which was good. Because that was the right call.

- Reaching out for help, yeah. - Yeah, understanding there's a problem and going to fix it. - How to fix it. - But so many people will try to not fix it. So again, how do you avoid yourself from getting scammed by people and getting with the wrong people? Now, number one, I think it's very important, again, is not to make decisions when you're in a bad spot. Because I think if you're in a bad spot, you're wanting to shove your chips in. But also, I think that a big part of this, and I kind of blame it on,

Like, why did FTX, why did that happen? Why was it able to happen? - There's no controls. - It's not only there's no controls, but digital currency, NFTs, all of that stuff became the frat boy casino. - 'Cause there's no controls. - Right, there's no controls, but it became the frat boy casino. The whole hustle mentality of Gary Vee, like all of that stuff has contributed to this easiest, the easiest way to get from A to B. - I'm not somebody, so we've talked a lot and I know,

All three of us in the room probably have a different opinion about this. I have a strong opinion that if I was going to bet on horses, I would bet on the horse that had an MBA versus the guy who's like, I went to Hustler University. You know, like to me, and it's because there's like a certain level of

risk management that comes with certain traditional paths. Like, do you know what I'm saying? I'm not, I'm not denigrating people that, that there's a lot of people we've, we know, and we've talked about that pulled themselves up and they, they have a high school education, but they're really smart and they're good with people and they make amazing realtors because they really care. And they, they, they grind it out and they really do all that good stuff. Right. Those people we hold up to high esteem because it's, you didn't have to follow a traditional path. Right. Yeah.

But then there's the guy who goes, well, that guy didn't follow a traditional path. So I'm going to kind of mimic what I've seen other people do. But I have no substance. I have no moral compass. That's like the Norm MacDonald. There's the one old guy that smokes, and he's the reason why you can still smoke. Yeah, but I know it kills you from cancer. But what about old man McDermott there? He's been smoking for 72 years, and he's fine. He's fine. So therefore, that's the standard. So people do that. What do they call that? They...

they affirm the antecedent or whatever with, they have this confirmation bias and it's like,

You know, you see guys on social media, I won't say names, but they're out there and you know that they're working very hard and they have unwavering belief in themselves and they're good realtors, right? But then there's these other people that are clueless. They don't go home and read books on stuff. They don't know their trade. They don't know their craft and they're kind of lazy. They want easy money. Yeah, because I think that's become the culture. And that's just why there's so much fraud going on right now. It's the easiest, which is crazy. Everybody wants something so quick. So,

I think you got to ask yourself when you look at an opportunity, you know, what are the controls? What are the controls to this? I mean, if anybody tells you anything's guaranteed, run, run from that. Who is controlling the money? Or it's easy. I don't like that phrase either. It's easy. Oh, this guy does this percent every day or whatever. I say, no, he doesn't. That means there's arbitrage. That means in all economic theory, that's going to be, that's either been gobbled up or would have been gobbled up if it was actually that.

- The only easy one is, is if you're insider trading. - Well, that's right. - Right, like if you're doing-- - Or selling pictures of your feet. - Or stuff, yeah, shit like that. - Feet pics is easier. - Or sticking a gun in someone's ribs, yeah. It's not risk adjusted zero. - No. - It's not risk adjusted. - And you're nobody special, right?

I mean, unless you're like a multi-billionaire and they're like, hey, you've got enough clout that you guys can pull markets. Yes. The average and above the people making multiple millions, you're not that special. You're 100% right. You're not that special. Too good to be true. And Warren Buffett gets pipes. Yeah.

yeah it's private investment opportunities and public entities so they'll go so ge will go to warren buffett and be like hey we're gonna cart we're gonna create this new preferred we're gonna carve it out it's a guaranteed eight percent for you because we need this for this project we go to warren we get this done we're a public entity but we we can we can bypass sec offerings with that pipe or whatever because he's so yeah accredited he's there i would say also another thing that i'm going to warn you of and this is personal experience because the worst the worst smoked i ever got

on investing in something I shouldn't have done. This is, this is why it happened. This is why it happened was beware the dog and pony show. So I'm going to tell you, beware the bright lights and the flashy thing. Monorail. Be, be, beware, beware, dude. I got, so the worst, biggest financial hit I ever took was a result of one two day trip when I

Somebody I knew said, hey, why don't you go with me on this trip? Where are we going? Well, we're going to this property that's being auctioned off in Sun Valley. And I got this deal. We're going to put money down on it to bid. And then I'm going to help my buddy who runs the auction thing, whatever it was. So he goes, yeah, we're going to go. We're going to take a plane. And this was not the plane that I ended up buying later, several years later. This is several years before.

And then he said, we're going to take a plane. Well, you know, cause we, we have a plane we're going to take. So here I am. I'm like, I get on a private jet. It was maybe the second or third time in my life I'd ever been on a private jet. Again, the private jet, we fly up. This house was owned by Dick fold, who was the president of Lehman brothers. No. Yeah. Lehman brothers.

Not known. Yeah. Dick fold. It was. And, uh, yeah, Lehman. And, um, it was his house was being auctioned off after he lost everything. So here I am, I'm walking out Dick folds house. It was the president who was the head of Lehman brothers. And, uh,

you know, I'd fly up there in private jets and all this stuff. And you know, dad, this is how we do it. And this is what we're gonna do. And we need to start to find you could raise the money, we can do this and that. So I went on raised for this entity. I mean, I put my money in, I raised, you know, almost a million bucks, which at the time was a lot. And, you know, here it is.

I wound up paying it all back personally. You know what I mean? When, when that whole enterprise went south and that bag of money took off to another part of the part of the country, I wound up paying everybody off personally. I don't think I know that. And all of that. Yes, you do. Cause you represent some of the lawsuits. It's the one that later on. Oh,

Oh, yeah. You know who it is. Yeah, you know who that is. But the reality of it is I got sucked in from the Dog and Pony show because I was like, here I am. I'm going to work every day. I'm grinding it. I got a very nice life. I like where I'm at. I'm financially secure. But I ain't going to Dick Fould's house on a private jet. I want it. Man, I'm telling you. Sounds big time, right? I wanted it fast, and I want it now. And this is how these guys were doing it, and I want it in. And that's what it was. That's a tough one, though, because that's a real –

That's not an intangible pie in the sky. It's not a fake Instagram post. Yeah, it's not an Instagram post. You get on a jet with people that you know. Yeah. I don't know if that's necessarily. But here's the thing, though. In retrospect, I genuinely believe that was all smoke and mirrors to close that deal because that person at the time had probably burned every single bridge with everybody they were working with, which is why they wanted to come to me.

and get another run yeah yeah i think all of that was hyper calculated

Which is sick, right? When you think about there's people playing three steps of fraud ahead of you. Holy smokes. I mean, I don't have a diabolical mind. I don't. I honestly don't. No, listen. I'm not saying that person intended at that moment to defraud me in the end. They probably had the best intentions, but they also knew that I could raise the money they could not. But did they know that if shit hit the fan, they would bail? Oh, yeah. I think self-preservation was probably programmed.

Do you see what I'm saying? So that's so, so every bad guy in jail thinks they're the good guy that just had a bad shake or whatever. Everybody has the self deception. Of course. So you gotta understand your, your liars and your thieves and your cheats. Very few genuine sociopaths will come up and be like straight up fraud, fake checks in that, you know, right. What it's gonna be is people making bad decisions.

compounding those bad decisions with more bad decisions and then self-preservation becoming a key paramount. You know what? And I got to tell you, I got...

I think it's, maybe it's the Madoff thing. Maybe that's what it is. But man, I woke up at three o'clock in the morning and like a sweat because, because, because my coach that I'm working with, um, that coaches me and I talked to about me, you know, I've got some investments out there that are, that are fairly large, that are handshakes that, you know, they're real estate investment deals that maybe are not going as well as I wanted them to. Sure. And it was just this ambiguity of not understanding that, that myself and my partners all had the same perception of the outcome of

of what was gonna happen to these investments if the outcome did not go the way we wanted.

And I woke up this morning first thing and I called one of the partners and I said, look, I need to get clarity here in writing as to what the expectation is that we're gonna do here. And I'll tell you, the conversation was a great conversation. And the people I talked to this morning were all like, look, here's the deal. We're not worried about it. This is gonna be fine. And if it's not, we're gonna pay everybody off anyway over the years 'cause we plan on being here doing business anyway. - That's right.

And I thought that was good. And again, maybe it's gun shy from the hit I took before or whatever, but

I think understanding and constant reassurance and understanding where you really stand with people is very important. Well, anybody that you ask to paper up a deal properly, if anybody pushes back on anything about it, you need to bail. You need to terminate that relationship. That's what Bernie did, right? Yeah. Anytime somebody approached him. Say, I'll give you your money back. Yeah. I'll give you your money back. Don't ask questions. People are like, oh, I don't want to get kicked out of this thing. But like you said, don't invest.

your last nickel, right? Because I also think that when money's going really good, I think people don't do their due diligence on investments and people they're hooking up with when money's good and they just start throwing stuff, right? You're right. I think both spectrums is a bad thing to do. Rich people think they got there because they're super smart. Smart.

Oh, man. Everybody thinks they are. In a head-flipping competition, if you have 10,000 people flipping heads, there's going to be some guy who flips seven heads in a row. He's not an expert head flipper. Yeah. It's a survivorship bias, it's called. Yeah. Right? And so these people that have made money over time, they just haven't been blown up. No. That's how I feel with the real estate. There's a certain amount of people out there. Colt, I'm sure you've dealt on one side or the other with a lot of them on the commercial side.

you know, residential markets has been their playground playground. Well, there's luck. Now, let's say, let's say, for example, let me ask you this, Chris, let's say, and this is a this is a problem that most people do. Right. So right now, there's a lot of investments, especially in the multifamily space. I saw somebody in one of my groups the other day posted. They said, look,

I underwrote three multifamily deals this week and the values are off to less than the bridge loans that were issued to acquire the properties. Yeah, I talked with them about that. Yeah, 2021. And the comment was just, buckle your seatbelt. This is going to get wild in the multifamily space because that got, like you think single family got accelerated? Holy shitballs. I mean, multifamily went berserk the last three years. So what do you think is going to happen? It's going to...

But because the I don't know I don't know what's gonna happen walk that back though just as an interesting point because what does that mean? What that means is five years when they gotta get their balloon payment. Yeah, they're gonna be screwed the investor plan when the wise investor Movement when you take on them down multifamily is what you want to do is you want to find one? that you could do one of two things you can either a or

cause it to appreciate by forced appreciation by improving the amenities, by improving the units, by improving those things. And then you can also do, I'm sorry, you can also do forced appreciation by raising the rents. By raising the rents changes the value of the property, obviously, because the cash flow is different, the cap rate's different, and there you go.

But what you want to do is you never want to do the whole place. Like say you're going to renovate the units, right? You never want to renovate 100% of them. You want to improve the buildings, you want to improve the amenities, and then renovate maybe 25% or 30% of them so you can still go to the next guy and say, hey, I left some meat on the bone for you to force appreciate this thing. I can get in, get my little snippy, and get out. Well, what's happening now is a lot of these that got acquired at top dollar

They took bridge loans with, like Colt said, three to five-year balloons on them where you have to get out of these loans. They're like, dude, you're due on this date. And now all of the sudden, the values of these units to sell on the, hey, to the next guy, we forced appreciated it. Even with all of that forced appreciation, they are still below the value of the bridge loan they took in the first place. Their DSCR is...

So 75%. Yeah. That's yeah. I mean, it's, it's scary. Let me tell you a story. When I worked at the external federal bankruptcy court for judge Markel, there was this guy in doing his chapter 11 plan. I don't know if I've ever told this story. I don't think I have, but anyway, he was sitting there, this young guy, um, when he was in his early twenties, he was a pizza hut driver.

He found out through the grapevine or whatever that there was going to be the Walmart on Arroyo or Arroyo Crossing, I think is what it was. I think it was that property. So he found out that there was going to be a Walmart there, somewhere over there, right? I don't know if he's in the Pizza Hut kitchen and here's some guys talking about this Walmart going in, whatever.

He figures it out. Hey, there's this piece of property across the street. So he buys it. He gets his probably friends and family. Does enough fundraising where he gets this property, though. Okay. So then sure enough, they announce. So now he has this leverage ability to say there's a Walmart going in there. Sure. I'm going to break ground. So he breaks ground. Right? Gets all this. Gets construction financing. Everything is perfect. They open. You've got to do this. The timing, I can't remember, but this was around 2010.

10. okay so I don't know when this project started 2008 maybe anyway he gets everything teed up this building is 97 fully leased out at above market rents kid crushed it home run yeah all right we're in chapter 11 court though why because his construction loan came due and there was nowhere else to find there's no one to pay yeah

Couldn't get perm financing. 2008, 2009, 2010. There was no permit financing. Credit markets were dead, yeah. Toast. So it was literally in the bowels, right? That 2010 point where there was no money. So this kid had to file an 11 and the creditors were fighting him saying, hey, go out and get some 15% hard money.

Which totally screws up the traditional number. You can't make it work. When hard money is going for 15% fully secured, it's nuts. This kid did everything right. So I talked to the judge about it. Because the credit markets went south, he got screwed. But again, construction financing is a credit card.

These bridge loans are a credit card. These aren't things, you're not entitled to permanent financing. You have to convince somebody you're credit worthy. I had an expert disqualified in a chapter 12 bankruptcy in Reno based on that exact point. They were trying to tell me that the credit worthiness of these individuals was only affected by the value of the land. And I said, no, it's the individual's ability to pay.

And Judge Bixler up in Reno disqualified the economics expert during an evidentiary prove-up hearing on this very basis. Because I said, are you telling me that people that are in default are 25 basis points greater risk adjusted on an asset capital model than is the Bank of United States of America? And he's, well, yeah, because it's about the value of the land. And anyway, so he disqualified him as an expert on that basis alone.

So bankruptcy has my experience in bankruptcy has been very valuable to understand. It's not always that you made a bad decision. It's that you are the result of bad timing. There's going to be some guy who's at the beach during a maelstrom. When a typhoon comes in, there was somebody at the beach. What happened to the property? So he had to restructure it for whatever it was, and he had to go through and...

I talked to the judge. I'm like, well, what do you think he's going to do? He's like, I don't know because there's only so much we can do here because this is a viable program. So under 1129 plan, you know, you can have your bankruptcy confirmed.

If your plan under 1129 is viable. Well, let's let's talk. I want to talk about that too, because I have an interesting situation that came up a couple of weeks ago and it was, um, it's, it's has to do with bankruptcy, which is this, which you've talked about. I you've talked about, yeah, you've, you've talked about, you've talked about that, right? You've talked about that, but let's say you've invested with this real estate person that is, that has done the Rob Peter to pay Paul from each house. And now it's going south, right?

and let's say you think it doesn't need to be real estate, whatever investment it is, whatever you've done, you've loaned somebody, you've invested in their trucking business, whatever it is. Can they go bank or crime? Hang on a second. No. I'm going to tell you what I feel to be, it is going to be your visceral gut reaction that you have got to control, which is this.

If things start to go south, let's say you invest in, I invest in Colt's widget company, which we know is, I mean, dumbass me. I knew he's got no qualifications to run a widget company. He's got square widgets. Zero qualifications. Square widgets. Anybody that runs best non-sexual performance in a pornographic film at the AVN Awards has no business running a widget company. I know this, but I like Colt, right? So I invest in Colt's widget business.

And then it starts to go south, and I think, like, I'm not getting my money back on the schedule I'm getting back. Like, say you've done this, and this is you, and I'm talking to you, and you can hear this. I think the worst thing you can do is start blazing cold. Everything in your body is going to be like, you mother trucker, where's my money? You saw this. You were supposed to do this, blah, blah, blah, and start recanting everything they were supposed to do. I think if you start that, if you do that, you are driving that person to your office to declare bankruptcy. That's right.

You've got to become, and it's going to be against every single fiber in your body. You've got to get on the, let me help you team. You've got to get on the, what can we do to get the widget company back on track? How can I get you to stop being the non-sexual pizza delivery guy in the porno? Sure.

Even though your award, sorry, award winning, non-sexual performance, pizza guy in the porno award winning. Sorry. When you search thespian, it's a different thing. It's a totally different thing. No, but how can I, how can I get you to do that and get you back in the widget business? Get doing, you've got to become, you've got to go cheerleader and try to protect your money. Because if you become a headache to that person,

They're gonna be KU. One of my favorite quotes ever. Was what? Is if you owe the bank $10,000, it's your problem. If you owe the bank $10 million, it's their problem. Yeah.

Okay, so just understand there are these tools out there for people that are going to be going through some hard times. They are. Bankruptcy filings, I was talking to one of my dear friends, Matt. He's a wonderful bankruptcy filer. You won't come to my office to file bankruptcy. You will call me, and I'll put you in touch with Matt. Matt and I did the national bankruptcy moot court together. We represented our school and state in New York for a national competition. Cole played football in our school.

Yeah. Oh, I did. But Matt's a very brilliant mind. And his partner right now is actually on life support. So it's Hamlin. Is that TMI for us, Colt? No, no, no, no. All right. No, it's one of those things. Tell your friends you love them. Tell your friends you love them. Tell your business partners you love them. Have a succession plan for your business. All right. There you go. But at the end of the day, what's going to happen is you come to the office and we tell you, hey, look, this is a business decision to make.

Right. Right. Yeah. John lent Colt a million dollars for this widget business. Is this widget business going to make it? No. Then that debt is bankruptable. Right. Okay. Because if you want this widget business to go on, he needs to either work with you, take a haircut, restructure, do whatever, but you have to. So there's powers of the bankruptcy court to do that on purpose. Now,

You think he would have at least had a widget booth at the AVN trade show. It's candy to a baby. Yeah. So you could add it. The widget booth was spent 200 grand on the booth. Okay. But here's, here's the other thing though, too.

Don't think that you can go out and do something illegal and have it ratified by the court. No, you cannot. You cannot. You can plan for bankruptcy, by the way. I don't want to make this a bankruptcy thing, but it's just something important to understand because this will be coming up for a lot of people. Under 507 and 508, they'll look back at what are called preferential transfers. One is unlimited, actually, if it's been done for the purpose of fraud, right?

And then one is within the last 90 days or presumptively fraudulently transferred. Okay. So what that is, they can claw that back.

And when you have a situation, right, where you file a bankruptcy, there's a state, all this stuff gets created. If you've done something that's illegal, right, the people who you've done it to can file what's called an adversarial proceeding, which is a lawsuit in the bankruptcy court. So there are ways of recapturing things if people have actually committed fraud. Now, the problem is, as John pointed out, John very aptly pointed out,

he goes i don't think the guy and maybe we don't want to air this in case it becomes evidence one day no no no no no i don't think he intentionally at the time of the airplane i think there became a very specific plan okay later on down the line that's a very good point to think about right it's in order to commit fraud to be guilty of fraud fraud is a specific type of thing in crime there's possibly carrying three times damages etc in order to be guilty of fraud you had to have fraudulent intent at the time it was done yeah

Can't just be like, John and I were trying to do this thing. No, let me ask you this. If I have a contract with you that says you cannot touch your left foot, you are well aware of that contract. You signed that contract. You will never touch your left foot. And you touch your left foot. Did you not willfully understand that you were breaking the contract? Yeah, but your example is particularly, it needs to be beefed up because-

it's a foot no no i mean look i know i went deep with the whole no no no no non-non-pornographic backstory on that with the widgets another good point with you i just go with the you raise another good point drain me today colt all the good stuff no you have to do something that's actually a crime in and of itself so don't commit this crime and i say okay and then i commit the crime because like your money because everybody here's another thing people don't understand

that in business you're protected legally by a thing called the business judgment rule. So if John and I are, let's say we...

Take over Colts widget company. He goes and pursues his, his, his dreams, his dreams of being a true thespian, not just the pizza boy. He goes on a traveling, you know, Hamlet show or whatever. So John and I take over the widget business. He takes it over as a creditor. You walk away, you know, in lieu of having him executing your personal guarantee. I know you're serious and I'm smiling over here because I, now I'm thinking, you

You know, Mike Tyson had his one-man show, right? I'm thinking, God, I could have a one-man show on. I saw Chaz Palminteri. He's breaking up the band, right? See, you're breaking up the band right here in front of us. I saw Chaz Palminteri. Cole's trying to go solo right now. He's already playing out the record. Chaz Palminteri's one-man rendition of A Bronx Tale is phenomenal, by the way. Just as an aside. But at the end of the day, John and I go do this widget company. And John goes, Chris, you're such a good actual widget master. I'm going to let you do this.

And I say, you know what we should do, John? We should take these widgets in our operating agreements as I'm legally allowed to do whatever I want in this LLC. So I say, I'm going to sell all the widget stuff and I'm going to start making banners for Colt's one man show. Right. And that tanks, obviously, because nobody wants to go see the one man show. So the business fails. I mean, but it doesn't take. And I'm the manager. Okay. So you can't sue me. Can we stop for a second?

I feel like we're about to make a couple million bucks right now. No, no, no, no, no, no. What is tanking? Is that not breaking even? Is that a smattering a few people in the audience? No, let's say it's Yvette, who's there reluctantly.

She would be the one that won it. You got that wrong. I'm a good friend of his, so I would be there supporting him with the banner that I paid print. We bought this new printing material. We bought this whole new print shop. You're saying you went full Miramax production marketing on this and then it just did not work. Take it to zero. Because you're all in on it, Cole. You can't sue me. See, you should appreciate that. No, I appreciate it. So you can't sue me, though, under the business judgment rule because I can articulate

Say, I thought we had a really good opportunity here, and I took a shot and we failed. You can't say, this guy got me in on these widgets, and then he started doing this. He brought out new Coke instead of Coke Zero.

You can't sue the executives of Coke for new Coke. You know, you can't, you're allowed to make bad business decisions without it being creating liability. So it's called the business judgment rule. But you could have in your partnership agreement, you can't spend X. All mine is like anything over five grand. You have to have approval. That comes down to controls. Controls. Exactly. Controls. I think the last thing I want to talk about when it comes to this is if you get in a bad spot with an investment somewhere or somebody else,

The one thing you can't do is you cannot perpetuate the bad idea or the bad position to somebody else to save your own skin And what I mean by that I got a call from somebody a couple of weeks ago and they said hey I need some advice and I said sure and and I was in I was having this conversation They said I'm in this investment. I don't think it's gonna go well. We did a we did a bridge or a gap loan for this deal It's taking forever. I I got the money. It's some of my money and some of my friends money My friend is freaking out there every day freaking out. I

So I got this other guy that I know that has a ton of money that he would literally could just take out my position right now. What would you do? And I said, do you think the situation is going to get any better? They said, probably not. And I said, so you'd basically be burning his money to protect yours. And they were like, ah, yeah, I kind of would be doing that. And I said, then you can't do it.

Not if you want to do business anywhere. Don't let your reputation become soiled on something else. And here's the thing, man. This is why I am very... I already did that. I lived it where I raised, like I said, almost a million bucks, whatever it was. $750,000, however much it was. And I was responsible for that money. There was no, well, it was a bad investment. Whoops, things went to zero. I mean, I paid all those people off. Because that was my reputation to pay that off. I mean, I was going to pay it off regardless. I could have...

I said, well, you know, I mean, it said in the documents, win some, lose some. But, you know, I wasn't willing to do that. And that goes back to doing your due diligence. Why are you selling me off your stake, right? Like it's – I saw some of the other – I love that. That's the Forex trading mentality. If you're so good at trading Forex, why do you need my money? That's like everywhere you look on social media, Forex.

Like we get spammed at simply Vegas constantly over the, I gave all my money to Molly Wilson, the Forex trader. And I gave, she turns it back. It's like reviews, comments, everything. And it's, it's dreadful. Well, think about this too. There's that whole, if you're playing a game of poker, you don't know the sucker is it's you or whatever. Yeah.

If you're the guy that's got this guy's like hey, let me teach you how to make you all this money right? And it's for some of these things now again. I don't want to be little coaching I don't want to be a little mentorship because to some people it's valuable to do I Know some people to do an exceptional job that and I'm not it's like you have to bifurcate because there's real people and there's fake people and everything Yeah, so this is only directed at the fake people right and

Let me teach you how to do this thing that if I had the money to and was doing that, it would be very successful. That would be great. Wait a minute. Why would you teach other people how to do it? You're just making money. You know, you're the pick and the ax guy in the gold rush. You're the guy selling. You're Levi. You're selling jeans right now. You're not. You are not the guy. You're saying, no, no, no. Let's go get gold together. Meanwhile, you're like, here, but just buy my pickaxes. Right.

I'm not going to go swing a shot. You know, one of my favorite things, never buy a protest sign from the guy that's telling you about the cause. That's not a good idea. Well, I think, you know, man, hopefully, you know, you guys got something out of that today and you'll be careful with your money. You'll be careful with your partnerships. You'll navigate this new...

man paradigm that's going out there but it's going to be coming fast and furious people looking for you to invest in certain things and there are great investments out there and there are terrible investments out there check your controls watch the controls and again i'd like to say one other thing that just happened to me recently this individual was buying a business through a business broker buying out his partner and i have to tell you business i have to tell you

You want to talk about a very unsophisticated process through somebody that I would have assumed was very buttoned up. So I'm not trying to take my own industry. Just to tell you, that is a line of business in real estate that I refuse to let happen at my brokerage, which is business brokerage, because the books are always cooked.

They're always cooked. And as soon as the new buyer gets in and realizes, wait a second, we've never done $50,000 a month in sales. Like these books all said, we got to the EBITDA. We've never done that. As soon as that happens, they turn on Sue Everybody. So no interest in those losses. What are you buying? Yeah. What are you buying? Well, it says inventory. Yeah. What is that? Show me the FFME. Can I see? Can I see the list? Yeah.

- Do you have debts? - Whatever. - Oh yeah, we'll add that now. Why do I have to tell you these things? It's your business. - Yup, I do not like that. I do not like that business. - Having your left on a lease with no options and a business specifically for that location. - With fixtures and the money you're paying for other fridges and the place. I'm telling you guys,

That would be the number one thing that I would focus on is have a lawyer review all of that. All that stuff. Not toot my own industry's horn here. That was painful. I didn't believe it was going to happen. We've always stuck away from that. Terrible. So Colt,

I'm going to give you the floor because you probably didn't get enough time. What about the news? I'm thinking they probably played. Well, what news are we going to talk about? You know what we can talk about? What's that? I saw a big commercial for iPhone. You know what their new iPhone is coming out? You know what their big sales thing is this time? Stabilizer on the camera.

that androids had for yeah samsung got that about 2016 guys so just to throw it out there so cold out of their piece of shit you probably got you probably got played short on the stage so i'd like to you know this time no get no get give your no no i'm over here thinking my one-man show it's going to be like mike but i'm saying i'm saying this is going to be cold give the people just cold give the people a little taste

Tell them what you say. Give them your acceptance speech for your best non-sexual performance in a pornographic film. And try to sell some widgets in there if you can, too. Let me tell you this. Go ahead, Cole. Have you guys ever tried to act? I took acting lessons, yeah. It's hard as shit. I love it. It's hard, though. It's fun. Yeah, it's hard. Have you ever tried to act? I know you're on the reality show, but like acting? No, no, no, no. I grew up in the theater.

I did. I grew up in the theater. My mother was a big, was heavily involved in the college theater program in my hometown. I grew up. I starred in my first play, like an adult play. I starred in my first adult play at age 13. What was it? Hamilton? That we're the real thespians here. The thespians here.

He thinks we're saying lesbians. That's why he shows up. Totally different thing. He shows up thinking there's lesbians here. Read the chat. Group chat. No. You guys would be a great lesbian couple. I have this, which is funny. I have this, which is funny. Rich. Rich lesbian.

Are we going to talk about my thespian greatness or no? I don't care. I'm over here thinking about starring in an antique shop with you. I have a playbill for my starring role that was signed by, it was a play called First Confession. And it was. It was a 13 year old. No, it was a 13 year old boy. Yes, Cole. It was not a movie you started. No, it's not.

So anyway, no, it's not that. But no, I started, you know what? I'm not going to tell you the story. Pay me an award right there. Congratulations, Sean. And with that, we'll see you guys next time. If you're going to move. Forgive me, Father. Keep moving forward. Jesus Christ. Hey, it's John Gafford. If you want to catch up more and see what we're doing, you can always go to thejohngafford.com where we'll share any links that we have, things we talked about on the show, as well as links to the YouTube where you can watch us live.

And if you want to catch up with me on Instagram, you can always follow me at thejohngafford. I'm here. Give me a shout.