Investment is a sore subject in Dosbarrios, an agricultural village 60 km south of Madrid. Even though tractors rumble through the dusty streets and strangers are met with open stares, the town learned last month that it's not as isolated as it seems: half of Dosbarrios' 2,400 residents have put their money into an allegedly fraudulent stamp investing scheme that has rocked Spain. "Before, our economic health was very good," says Mayor Juan Bautista Martínez. "Now, it's so-so."

Dosbarrios residents are closely watching the unfolding investigation into Afinsa Bienes Tangibles and Forum Filatélico, two investment companies that

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nginx/1.14.0 (Ubuntu) specialize in valuable stamps. At the start of the investigation, nine executives of the two firms were taken into custody to await trial on accusations of operating a pyramid scheme to fund payouts, and vastly overcharging clients for stamps of negligible value, accusations that both companies insist are unfounded. Since then, five of the suspects have been released and Forum has filed for insolvency. Consumer-protection groups warned that collectibles companies are insufficiently regulated — and therefore susceptible to fraud — as early as 2002, but government authorities took no action. Now an estimated 350,000 Spaniards are affected, most of whom are small investors and many of whom are grouped in villages like Dosbarrios. The scandal's widespread reach suggests that, for all the country's recent economic growth, many Spaniards remain financially naive.

"There was a lack of knowledge here," says Mayor Martínez. "Very few people understood the reality of the market." In that vacuum, the promise of higher yields — starting at 6%, as compared to the banks' 2% — easily outweighed caution. "It spread from mouth to mouth," explains Martínez. "One person would tell a friend or relative about the money he was earning, and that person would convince the next." Indeed, there is only one Afinsa agent in Dosbarrios, and everyone knows him. "Raúl Rodríguez is the brother of my husband's friend," says Rosario Suárez, 35. "At first I was skeptical, but he came to our house, and I talked to other people who had invested with him, and I was persuaded." Rodríguez describes himself as "one of the victims" and says that most of his local clients have been "reasonable." At his office, he advises clients to be patient and gather together all their pertinent documents. But Pilar Vicente Ruíz, a homemaker with €6,000 invested, is one of many still furious with him. "If he could come to our house to sell us the policy," she asks, "why can't he come to our house now to tell us what to do?"

As investors await the outcome of lawsuits, they also wonder about the possible impact on the local economy. "I've heard that some families who had put down deposits on new apartments have pulled out because they [are worried they] can't pay for them anymore," says Martínez.

For Suaréz, the potential loss of what she calls her "piggy bank" could mean canceling summer vacations this year and postponing planned home renovations. But she worries most for some of her neighbors. "There are a lot of pensioners in this town who live off their Afinsa earnings," she says. "They're the ones who would really suffer." Fructuoso Pacheco, 85, is one of them. The retired farmer has about €18,000 invested with Afinsa. He's angry, calling the whole affair "shameless." But he is also circumspect. "I blame them," Pacheco says. "But I blame myself, too."

• LISA ABEND / Dosbarrios
• How an allegedly-bogus investment scheme penetrated so deeply into Spain