Florida was particularly hard hit after the housing bubble burst in 2007. By late 2008, certain areas like Boca Raton and Palm Beach were devastated by the Bernie Madoff scandal and houses already under water went on the market at firesale prices.

In retrospect, the state was unprepared for the volume of fraud. A 2009 National Consumer Law Center report ranked Florida’s deceptive and unfair trade practices statutes covering credit, insurance and utilities as weak, and said that statutes addressing fraud in real estate and post-sale activities such as debt collection were only slightly better.

Advisors have complained about the pace of prosecutions. At some levels, law enforcement agencies may lack resources to investigate financial crimes.
“Prosecutors can’t be blamed,” Auslander says. “Once a case is investigated, it’s prosecuted like any other case—getting to that point is a challenge because fewer regulators are asked to do more.”

Florida’s Office of Financial Regulation acts as a clearinghouse for most complaints about financial crime. The office has a $38.5 million budget and 362 full-time employees to monitor and review the state’s 409,348 registered financial institutions.

“Our regulators are vigilant, but the legislature defunded many agencies,” Auslander says. “It is impossible for them to keep up with the scams. Florida has an obvious funding deficit.”

Florida’s recent fiscal discipline may paradoxically harm the financial health of its residents, Zmistowski says. “Because this is a balanced budget state, prosecutors and regulators are behind the eight ball,” Zmistowski explains. “Instead of having five attorneys to prosecute, they have two.”

Because fraud investigations require extensive review and number crunching, investors and other victims may miss opportunities to recoup their losses.

“Restitution can be difficult in fraud cases because often the scammer has spent the money, either on their personal lifestyle or to maintain the appearance of a legitimate business, before the investor realizes they’re a victim of fraud and files a complaint with our agency,” says Katie Norris, spokesperson for the Florida OFR.

Moisand says the lack of restitution adds to the impression that enforcement is lagging. “It seems like there is no enforcement because when the fraud is discovered, the money is gone,” Moisand says. “It feels like nothing was done, but in reality they’ve found and stopped the fraud.”