Larry and Darla Ward of Perham, Minn., lived frugally to build retirement savings of about $500,000.

Most of their money disappeared by 2018 after they entrusted it to a financial adviser who placed the funds in what was later found to be unsuitable, volatile investments, such as oil and gas and real estate limited partnerships.

Last month, an arbitration panel of the Financial Industry Regulatory Authority (FINRA) ruled for the Wards.

It found that financial adviser Steven Knuttila and Capital Financial Services (CFS) of Minot, N.D., and its former president, John Carlson, breached their fiduciary duties by urging the Wards to invest the proceeds from the sale of their house inappropriately.

FINRA awarded the Wards $275,000 in compensatory damages, $150,000 in punitive damages and $100,000 in attorneys fees. It also told CFS, which has since closed, to pay $414,000 in sanctions.

Chet Taylor, a veteran Minneapolis securities lawyer who represents the Wards, has gone to court to try to collect the money. On Friday, Taylor asked Hennepin County District Judge Joseph Klein to confirm the FINRA award.

After testimony in a virtual hearing, Klein said he would soon rule on Taylor's motion.

Knuttila, 70, appeared at Friday's hearing and told Klein that he is destitute, driving a bus and collecting Social Security. "My financial status is bleak at best," he testified.

Carlson, who also appeared at the hearing, had no comment.

Martin Fleischhacker, the financial fraud ombudsman at the Minnesota Department of Commerce, said the case is a proxy for elder fraud that the state agency has been fighting for nearly a decade.

The Minnesota Legislature, in 2018 and again in 2020, passed bills that empowered banks, financial and legal professionals to take measures and notify authorities if they suspect a "vulnerable elder" is being taken, whether by a financial adviser, family member or foreign-based "dating" or other scam used to fleece them.

The Wards are now living on $25,000 in annual Social Security benefits.

"We are satisfied that we won," Larry Ward said last week. "But it doesn't appear that we are going to receive any of the money. We're worried. The majority of the money we invested [is gone]."

Taylor said he's more optimistic than the Wards.

"The brokerage firm is out of business, claiming no money, but that's yet to be tested," Taylor said in an interview before Friday's hearing.

By 2019, FINRA and the Minnesota Department of Commerce had barred Knuttila from the securities business over numerous customer allegations.

Taylor said there were other arbitrations that CFS settled for nearly $3 million that alleged similar behavior and ended up putting the firm out of business by 2020. He said the Wards were the only claimants who took an arbitration all the way to a judgment. A former CFS compliance officer had warned Carlson of the inappropriate investments being sold to elderly clients, according to testimony.

Fleischhacker said his office gets about 15 legitimate cases weekly to investigate from lawyers, financial professionals, banks and credit unions. Local police departments are overwhelmed with requests for help.

Often Fleischhacker or other authorities will respond to a credible report by telling a financial institution to put a hold on an account, aside from regular living-expense withdrawals.

"It allows bank regulator and law enforcement to surgically go in and make sure they have money for living but block the huge wire transfers and others of $10,000 or more. To stop what may be fraud. I can investigate who's getting the money," he said.

Some fraud cases involve people from overseas. Fleischhacker said there are federal laws that apply to those cases.

Some online scammers are so brazen they've lifted Fleischhacker's official photograph from the internet and used it in their pitches.

Elder fraud is the fastest-growing category of financial crime because the elderly tend to make compliant victims, regulators say.

However, most financial fraud against elders goes undetected. It's a growth industry of greedy family members, illicit telemarketers, third-party caregivers, wayward financial advisers and others. Prosecutors, with limited resources, pursue only the strongest cases brought to police and state investigators.