Quotes of the Day

Lured by the promise of 6% returns, and hoping to save money for her autistic son, Felisa García Castro invested €30,000 over the last decade in the Spanish collectibles firm Fórum Filatélico. Last week, the 41-year-old Barcelona administrator learned the trading company she thought was putting her savings in valuable stamps was instead using it — along with the savings of another 210,000 Spaniards — to advance an elaborate pyramid scheme that netted company executives huge profits. "I've gone 10 years without a vacation so that I could put money away for my boy," says García Castro. "I can't begin to think that it might all be gone."

But gone it may well be. On Tuesday, police sealed the offices of both Fórum Filatélico and Afinsa, the world's third-largest collectibles dealer and largest stamp-investment firm, which controls two-thirds of the U.S.-based auction house Escala. Nine executives from the two companies were arrested and charged with fraud, money laundering and insolvency. Spanish police publicly asserted that the companies offered "high returns from the purchase and management of a stamp fund that was seemingly made up of overvalued — or even fake —stamps, and whose returns came not [from the stamps themselves] but from money brought in by new clients." The news sent Afinsa's shares plummeting 54% on the U.S. nasdaq.

Both Afinsa and Fórum Filatélico denied accusations of wrongdoing and insisted their holdings, comprised mostly of money from small-time investors — some 350,000 between the two — were safe. But that seemed uncertain in light of the fact that Lloyd's of London had, within the last year, decided not to renew its insurance policies with both firms.

Several of the Spain's consumer protection groups previously had issued warnings about the risks of investing in stamps and artworks, and called for increased oversight of the collectibles market. Spain's 2003 law governing collective investment companies does not protect investments in collectibles, but with outraged investors lining up outside the doors of both Afinsa and Fórum Filatélico — and panic spreading — the government is scrambling to reassure them. "We're going to do everything we can to help them," said Diego López Garrido, parliamentary spokesman for the Socialist Party. After announcing that the government would provide free legal representation to those affected by the fraud, Deputy Prime Minister María Teresa de la Vega added, "The government ... is studying the possibility of adopting means of support for those [victims] whose financial circumstances are most precarious."

Andreas López, 60, who has €12,000 invested with Fórum Filatélico, is skeptical. At an outdoor meeting in Barcelona for Afinsa and Fórum investors, the driving-school instructor noted that Spain has a long history of fraud. "No one ever takes responsibility, no one ever resigns," he said. "It makes me embarrassed to be Spanish."

• LISA ABEND and GEOFF PINGREE
• Spain prepares to help thousands of small-time investors in a pyramid scam