New Investment Options, New Risks: Expanding Retirement Options Creates Fraud Risk
Welcome to the July 2025 edition of our newsletter! In this issue, we’ll examine the risks of broader investor access to areas like fine art and wine – which have been a favorite avenue of scammers for decades.
Retirement Savings of the Rich and Famous? Or Another Ponzi Scheme Opportunity?
A retirement savings crisis has been building in America for decades. As the Trump administration plans to expand investment options within 401(k) plans to include private equity, alternative assets and cryptocurrencies, the bull case for such an action would be a way to beat public market returns and bolster savings amounts once retirement is a possibility.
Investing in alternatives, which could include fine art or wine collections, owning fractional shares of income-producing real estate, or “digital assets” like Bitcoin, each have value propositions which are not hard to find, and each are less tethered to public stock or bond markets, which can insulate them from broader shocks. The other aspect they have in common is that each is a routine vehicle for fraud.
Art and wine collections, for instance, play upon an investor’s aspirations and desire to emulate high-flying lifestyles they see in television or social media. Yet in past investigations, we’ve uncovered a variety of frauds in this area, including an art collector and dealer who pledged the same artworks as collateral for dozens of loans, hoping that none of the lenders would see, via due diligence, that a piece was already pledged to another lender. We helped uncover the fraud, and one unfortunate downside for the harmed parties was that, even if they could recover the monies lent, the process of asset identification and litigation to collect was a costly and stressful experience.
The siren song of alternative assets pumping up a 401(k)’s returns, so that individual investors can match returns generated by large pensions or family offices, is indeed a tempting one. If a client inquires about placing their assets, or those of a charitable endeavor, in such ventures, they have a duty to thoroughly investigate the parties involved and to see the risks as they also see an opportunity to diversify and generate returns.