Warren Shumway was looking to invest $2 million with the hope he could get a decent return. He found a machine that would instantly create a supply of hot water. The problem was it didn't yet exist - it was just in the planning stages. Shumway decided to do some background research on the company that was developing it.
"I had gone on the internet to research the company," said Shumway. "I wanted to see what the stock was selling at, see where they were at, and everything seemed to be good."
The Tuscon man decided to pull the trigger and invest the entire $2 million in this one project, with the intent being a return within 90 days.
Those 90 days came and went. Shumway hadn't received his money, and no progress was being made on the launch of the hot water heater. He told a friend that he was getting worried. That friend told Shumway something quite upsetting.
"Something is wrong here, Warren. These guys are driving big, fancy cars, building big houses. They're not using their money. Something is wrong."
Sadly, Shumway's friend was right. The people behind the water heater were using investor money to live the high life.
"One of the defendants actually had a custom built home," said Assistant Attorney General Nicholas Klingerman. "His payment was over $10,000 a month just for that home."
The case was turned over to US Postal Inspectors who confirmed that two company executives were using investor money for their own personal use.
"They would be able to get shares themselves and then - through a shell game of sorts with these shares - were able to artificially inflate the price, award themselves even more shares, then at the end of the day, when the music stopped, the investors were left without anything," said Postal Inspector Daniel Grossenbach.
"The fraudsters were able to enrich themselves from zero to $6.8 million in about three years."
Shumway lost his entire $2 million investment, and it turns out he was not alone. Authorities say the men behind this scheme had scammed more than 150 people.
While the two men responsible have been arrested and charged with more than 150 crimes, it is small consolation for Shumway. While the two are awaiting trial, Shumway can only share the valuable lesson he learned the hard - and expensive - way.
"Diversify your assets. Probably my biggest mistake was putting all of my eggs in one basket."
