‘Humiliating’: How a scammer cost Scott Pape $5000

Scott Pape was recently scammed by a bloke. But here’s why he was a sitting duck and how you can learn from his experience.

Author and financial advisor Scott Pape is the Barefoot Investor.

So this is kind of humiliating, but I have a confession:

A few weeks ago I got scammed … and it ended up costing me $5000.

The toughest part to swallow?

It was kind of my own fault.

See, I have a longstanding rule of never reading anything that’s written about me. I don’t Google myself. I’m almost never on social media. Heck, I don’t even manage to read all my emails (luckily I have my long-suffering editor to help go through them).

In other words, I was a sitting duck just waiting to get scammed.

Here’s what happened:

A bloke set up a Barefoot Investor beginners Facebook group – that I knew nothing about – and it quickly grew to almost 100,000 people.

This group served as his primary marketing database.

Then he set up a website called Barefoot Budgets that looked and felt like my own Barefoot website.

He charged people $120 a year to access it.

Yet, more worryingly, he was recommending that his ‘Barefoot Beginners’ speculate on risky crypto and foreign exchange apps, because he was getting kickbacks from them.

Shockingly, this was going on for a couple of YEARS.

So, while old Scotty Boy was happily bouncing along on the tractor slashing grass, this dude was making hay while the sun shined!

There are ways to reduce the risks of being scammed

The first I heard about it was when someone told me they wanted a refund.

“For what?!” I grunted.

Then I Googled ‘Barefoot Budgets’.

What the slash?!

The first thing I did was pay for a membership to Barefoot Budgets. (When the sign-up form asked me “How did you hear about Barefoot Investor?” I replied, “Because I bloody wrote it!”).

The second thing I did was call my lawyer.

Here’s you: “Okay, Barefoot, it sucks to be you, but surely this doesn’t really apply to me.”

Here’s me: “Oh yes it does.”

If you’re reading this you are, statistically, one of the wealthiest people on the planet … and to 90 per cent of the world you’re rich, and a juicy target.

That explains why self-reported losses from cybercrime hit more than $33 billion last year. And also why calls to the Government’s Australian Cyber Security Hotline [phone]) surged 300 per cent last year.

So, here’s what you should do:

First, turn on ‘multi-factor authentication’ for all your accounts. (Google it.)

Second, use a password manager. (I use Dashlane to securely store my passwords.)

Third, pay for a virtual private network (VPN). (I use ExpressVPN — for $100 a year it’s good insurance.)

Finally, learn the lesson from me: keep your eyes open, especially when it comes to your identity. And if someone is pitching you an investment opportunity online claiming to be me … it’s not me.

The wash-up was that it cost me $5000 in legal fees to put a ‘cease and desist’ on this guy.

Or, as I like to think of it, the cost of a good tractor slasher.

Tread Your Own Path!

A Mother’s Tragedy

Scott

My son tragically took his life earlier this year and I need help sorting out his estate. Nick was 30 and was fighting for custody of his two children, aged seven and three, as their mother is an ice addict (as is her new partner).

Her mother is now fighting her own daughter for custody! My grandkids have not only lost their dad but also have been traumatised by neglect and abuse from their mother and the new partner. I am still grieving but I am having to sort out some sort of investment for the children for their future. I have nearly half a million dollars from Nick’s estate, and my ex-husband and I are the beneficiaries. How do I set up an investment, and what should I do?

Nicole

Hi Nicole,

My heart breaks for you, and your grandchildren.

So I think you need to go and see a lawyer, pronto.

There are two issues:

First, to see if you can get custody of your grandkids.

Second, to protect the half a million bucks and ensure that it benefits your son’s kids.

My Barefoot lawyer, Dr Brett Davies, tells me that the rules are complex and different in each state. But, typically, one-third of a deceased person’s legacy would go to their spouse and two-thirds to their children. So you may want to talk to your lawyer about bringing an action so that 100 per cent of the money goes to the kids, to be held in trust by the grandparents.

As for where you’d invest the money, it depends on who gets custody (also another thing to get legal help with), and what the day-to-day costs would be to look after the kids.

Once you’ve worked this out, you could invest a portion of the money long term for their future, probably via a low-cost high-growth share fund from the likes of Vanguard.

Good luck.

The Coming Property Crash

Hi Scott,

With all the craziness of Russia invading Ukraine and China looming in the background, I had a sudden worrying thought today. What would happen financially in Australia if there was a third world war? My partner and I are in our early forties and are about to purchase a third property. It is a significant spend, so is the possibility of a world war something we should add into the equation? I guess I expect the usual stock market crash, but should we also be concerned about a possible crash in the housing market?

Tania

Hi Tania,

Well, I am.

However, it’s got nothing to do with Russia or China or any other geopolitical risk — which I know very little about, and cannot predict.

Instead, what I am focused on is the impact of rising interest rates. The last time the Reserve Bank increased rates was November 2010 … and at that time the cash rate was 4.75 per cent. Today it’s at 0.10 per cent.

Well over two million people have fled Ukraine since Russia launched its attack on February 24. (Photo by Chris McGrath/Getty Images)

The housing market has gone a little crazy since Covid (as has the share market), as a result of basically zero interest rates. Nationally, house prices jumped by 22 per cent over the past year, according to CoreLogic. I’m certainly not predicting it, but it wouldn’t surprise me if house prices (and the share market) came off a bit from here. That said, I have no plans to sell any of my own property. And if you can afford the investment, and you plan on holding it for decades, you should be fine.

Flooded

Hi Scott,

My parents were recently evacuated in the early hours of the morning and taken to temporary accommodation. Their property is flooded and the farm has sustained major damage. They are still reeling but I want to support them, and I know there is about to be a lot of paperwork. What’s your advice?

Kate

Hi Kate,

This takes me back to the bushfires of 2020.

I was sitting on a makeshift card table in the local town hall helping survivors.

The two things I learnt from that experience was:

It’s natural to be overwhelmed at the enormity of what’s hit you, and what you have ahead of you.

Volunteers from the State Emergency Service rescue a cat from a flooded farm house in western Sydney on March 3, 2022. (Photo by Muhammad FAROOQ / AFP)

And, in the first few weeks of a natural disaster it’s chaos. The Government is still formulating its plans, and the insurance companies are … lawyering up.

So my advice to your parents — and you, if you’re helping them — is to hold tight on the finance front for a few weeks. Don’t sign anything, don’t agree to anything — and if you do, remember there’s a cooling-off period.

However, there is something you can do: hook your parents up with a rural financial counsellor (1800 007 007). The counsellor will be able to take down your parents’ details, read through their insurance policies, and investigate what grants are available – or might become available in the weeks and months ahead.

Finally, after such a traumatic event, being with them is probably the best thing you can do right now. Good luck.

My Husband Took a Secret to His Grave

Hi Scott,

When my husband died in 2007 I was left with nothing, because he had gambled everything away secretly. Since then I’ve managed to raise our three children and keep a roof over our heads, even though I’ve had to rent. I don’t expect you to reply, but just know this: I have always classed myself as a moron with money, but you made me feel like a superhero. That’s the most important thing I got out of your book. It was simple and you made me feel confident and happy.

Tracey

Hi Tracey,

It’s way past bedtime at the Pape household and I’m sitting here at the end of my daughter’s bed, reading your question on my laptop. My daughter sat upright in bed and asked me why I looked so sad. I explained that I was actually happy, because I’d just read a lovely letter from an amazing woman. Thank you for sharing.

You Got This, Tracey.

Information and opinions provided in this column are general in nature and have been prepared for educational purposes only. Always seek personal financial advice tailored to your specific needs before making financial and investment decisions

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Originally published as ‘Humiliating’: How a scammer cost Scott Pape $5000