Buyer's Denial

The Times has a great article about buyers denial: "[The] belief that somehow a fraud was not what it seemed to be, and that there was still a way to avoid losing the money the victim had foolishly invested."  The article centers on victims of a fraud involving a company called CMKM Diamonds:

Several shareholders in CMKM — some of whom kept buying shares after the government exposed the fraud — want 10 current and former commissioners of the Securities and Exchange Commission to pay them $3.87 trillion, an amount equal to about half the United States government debt in public hands. You might think that would be enough, but the suit claims those are merely compensatory damages. They also want punitive damages, but do not cite a figure.

That is an impressive amount for a company whose last published balance sheet showed total assets of $344. That is dollars, not millions.

The tale the shareholders tell, in a lawsuit filed in January in federal district court in Santa Ana, Calif., is of a conspiracy involving not just the S.E.C., but also the Justice Department and the Department of Homeland Security. 

The article as a whole is worth reading.  Indeed, many fraud victims seem to go through an incredible amount of motivated reasoning in order to avoid facing the reality of having been duped.  Perhaps motivated reasoning is what got them in the fraud in the first place, making them more likely to engage in further motivated reasoning when confronted with evidence that they have invested in a fraud?