A Future Headline: Biff’s Investing Firm Cleans Up With AI
A future Biff and his fictional investment company will conspire to rip you off by professing to use amazing AI tools. How can you protect yourself?
It’s only a matter of time before a story with that headline, or something like it, appears in the financial press. Recent stories in the news indicate that elite investment professionals have purportedly had astounding success in trading securities for short-term profits by using artificial intelligence (AI) programs to chart the course of investments. This may well be the future, because computers can do everything faster than human brains.
Somewhere, in his parents’ basement, the next Sam Bankman-Fried — let’s call him Biff, after the blowhard from the movie Back to the Future* — is using an AI program to determine which securities to buy and when to buy and sell them. He founded Biff’s Investment Management, and he’s making money hand over fist, not just for himself, but for his very happy clients. Until he doesn’t. It could be that Biff’s AI program wasn’t as foolproof as he thought. It could be that Biff’s finger slipped, and he shorted a lot more stock than his AI program told him to sell. It could be that a disgruntled troll in Biff’s back office just made a series of blunders.
Biff is a fraud
Or, as I hereby predict, Biff doesn’t have an AI program at all. The trades were never made. The profits never existed. The reports to his clients were a series of postdated fabrications. Does this sound familiar? It should. Just substitute “Bernie Madoff” for “Biff.”
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Madoff made his customers believe him by inventing a nonexistent trading strategy that purportedly beat the stock markets. Every. Single. Month. But he never made any investments at all. How did he fool his clients? Toward the end of every month, his staff of collaborators would pick a few stocks that had actually risen in value that month, backdated fictional purchase confirmations for trades that had never been made at the beginning of the month and equally fictional sale confirmations for the end of the month. Customers got statements showing those fictional monthly gains.
Instead of investing his clients’ money, Madoff funded a lavish lifestyle for his family and used later investor cash to pay off any customer who chose to withdraw money. It was the biggest Ponzi scheme in history.
Biff will tell his clients that his AI program has been tested by millions of hypothetical trading scenarios and is 97% profitable. (A 100% success would sound too much like an election result in a dictatorship.) And of course, Biff can’t share the details of how the program works this magic, because everyone would use it and would break the concept. In other words, he will simply modernize Madoff’s cover story.
What can you do to minimize risk?
AI investment advice is a new application of a very new technology, with all the risks that entails. You should not put all your financial eggs in this basket. If you do believe that there is merit to the concept that an AI program may in fact beat the market, how can you minimize the possibility that a bad actor like Biff misappropriates your cash and securities?
- As we all know from reading our collection of Spider-Man stories, Uncle Ben told Peter Parker that “with great power comes great responsibility.”** The Biffs of the world will never get that message. It falls to you to take as many precautions as you can to avoid the possibility that your assets are misused. Regardless of where you get your investment advice, make sure that your cash and securities are in the custody of a broker-dealer registered as such with the SEC and is a member of the Securities Investor Protection Corp. (SIPC). Your periodic statements from a registered broker-dealer will reflect exactly what cash and securities positions are being held for your account. Monitor those periodic statements closely. In a world where monthly statements or quarterly statements are distributed electronically, rather than mailed, it is easy to ignore them. Further, this is not a foolproof system: Madoff deceived both regulators and investors for decades. While his investors did not receive the fictional profits they thought they had earned, Madoff’s victims did receive the net amount they deposited with him.
- Identify any disparities in your brokerage firm statements from what you understand your holdings to be. Do this in writing. Remember this: Phone calls are worth the paper they are written on. If you do speak about your account with anyone, confirm the details of that conversation in writing. With email at your fingertips, there is no excuse for not having a written record of any issues.
- If you have difficulty reaching any investment professional, contact the SEC and your state’s securities commissioner immediately.
* Biff figured most prominently in the 1989 movie Back to the Future Part II, in which he used a sports almanac from the future to place bets on upcoming games.
** In particular, Marvel’s Amazing Fantasy #15, August, 1962.
Related Content
- Beyond the Hype: A Guide to Investing in AI
- Can Stocks Picked by Artificial Intelligence Beat the Market? 3 Stocks to Watch
- How AI Can Help Take the Emotion Out of Investor Decisions
- AI Has Powerful Potential to Make Investing Decisions Easier
- Don’t Hand Your Retirement Income Planning Over to AI Just Yet
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Stephen Harbeck served as President and Chief Executive Officer of the Securities Investors Protection Corp., a nonprofit created by Congress to protect customers of failed brokerage firms, from 2003 to 2018. He guided SIPC through the insolvency of Lehman Brothers, the largest bankruptcy in history, the collapse of Bernard Madoff’s brokerage firm, the largest Ponzi Scheme in history, and other major insolvencies. Harbeck retired as President and CEO of SIPC in 2019. Since then, he has acted as a consultant to the Shanghai Financial Court, and Shanghai Jiao Tong University, and is currently a consultant to the Japan Investor Protection Fund.
-
How Prepaid Verizon Phone Service Works and When It's a Smart ChoiceExplore the differences between Verizon Prepaid and Verizon Postpaid plans—costs, perks, flexibility, and when going prepaid makes sense.
-
Try This One-Minute Test to Uncover Hidden Health RisksFinding out this little-known fact about your body could reveal your risk of heart disease and more. It's a simple, free check for healthy aging.
-
Social Security Wisdom From a Financial Adviser Receiving Benefits HimselfYou don't know what you don't know, and with Social Security, that can be a costly problem for retirees — one that can last a lifetime.
-
Take It From a Tax Expert: The True Measure of Your Retirement Readiness Isn't the Size of Your Nest EggA sizable nest egg is a good start, but your plan should include two to five years of basic expenses in conservative, liquid accounts as a buffer against market volatility, inflation and taxes.
-
New Opportunity Zone Rules Triple Tax Benefits for Rural Investments: Here's Your 2027 StrategyNew IRS guidance just reshaped the opportunity zone landscape for 2027. Here's what high-net-worth investors need to know about the enhanced rural benefits.
-
The OBBB Ushers in a New Era of Energy Investing: What You Need to Know About Tax Breaks and MoreThe new tax law has changed the energy investing landscape with expanded incentives and permanent tax benefits for oil and gas production.
-
Ten Ways Family Offices Can Build Resilience in a Volatile WorldFamily offices are shifting their global investment priorities and goals in the face of uncertainty, volatile markets and the influence of younger generations.
-
Should Your Brokerage Firm Be Your Bookie? A Financial Professional Weighs InSome brokerage firms are promoting 'event contracts,' which are essentially yes-or-no wagers, blurring the lines between investing and gambling.
-
Supermarkets Have Become a Pickpockets' Paradise: How to Avoid Falling VictimSome stores regularly rearrange inventory with the aim of increasing purchases, and they're creating opportunities for thieves to steal from customers.
-
I'm a Wealth Adviser: These Are the Pros and Cons of Alternative Investments in Workplace Retirement AccountsWhile alternatives offer diversification and higher potential returns, including them in your workplace retirement plan would require careful consideration.