This latest one preyed upon retirees in California and Illinois and their fears about retirement funding.  The fraudsters lured in their victims to an ‘estate planning’ seminar and then, after gaining the retirees’ confidence would convince them to purchase promissory notes linked to what they termed “Turkish Eurobonds.”  Needless to say no such investments were made and the fraudsters simply used the money to finance lavish lifestyles.

Be on the lookout for these deals that may sound too good to be true or are for investments that you have never heard of before.  Always be wary of salesmen who try to push a quick investment because ‘this won’t last’ – almost always a sure sign of a scam.

The web site in question tries to mimic the Securities Investor Protection Corporation’s (SIPC) website to lure in potential victim.  The web site claims affiliation with the International Monetary Fund, World Bank and others in its bid for authenticity.

There is really no way to prevent con artists from trying to run frauds but with a little healthy skepticism many potential victims might avoid these ‘too good to be true’ scams.

Here’s the SEC bulletin:  http://www.sec.gov/investor/alerts/sipcscamalert.htm

In this case the alleged fraudsters were telling investors that they were investing in promissory notes supposedly issued by two companies, both owned by the alleged fraudsters – a fact not disclosed to victims. Instead, the alleged fraudsters simply used new investor money to pay interest to existing investors.

The SEC alleges that the couple, Gastin and Teresita Cantens are prominent in Miami’s close-knit Cuban-American community but started to “ruthlessly exploit vulnerable elderly investors who trusted them with their life savings.”  To be successful fraudsters the Cantens held themselves out as a “pious couple closely involved with educational and religious organizations” but, according to the SEC were really using defrauded investors’ money to support a lavish lifestyle.

All fraud is wrong but to me it is particularly egregious if the fraudsters take advantage of elderly people and those people’s religious and charitable beliefs.

This is an all-too common problem with brokerage firms.  While the large majority of brokerage firms mean well and supervise properly there remain a large number of brokerage firms who either cannot properly supervise their operation for various reasons or worse yet, there are firms who don’t really care about proper supervision.  This particular instance involved a common scenario where  the brokerage firm is in California, the broker is in Houston, and the client is another state.  It is difficult for firms to properly supervise their geographically dispersed registered representatives/brokers.  What happens is the classic ‘when the cat’s away the mice shall play’ scenario resulting in fraud such as the SEC charged in this case against the broker himself.

What to do?  Proper supervision can be done if the brokerage firms are held accountable but they resist because supervisory personnel are a cost instead of a profit center for the brokerage firms.  Thus many brokerage firms will opt for less supervisory personnel and factor into their cost of doing business the settlements and fines they have to pay for not having proper supervision.  One possible solution would be ensure that the SEC is actually focusing on this issue; it may be more expensive for the SEC but will protect many, many investors.

Here’s a link to the SEC’s press release: http://www.sec.gov/news/press/2010/2010-35.htm

Sarah N. Lynch reports:

“The judgments bar the men for life from serving as a director of a public company and enjoin them from violating securities laws. The SEC had accused them in its civil case of failing to disclose hundreds of millions in executive indebtedness and executive compensation.

They were convicted for their roles in the criminal case and sentenced to serve terms [of various lengths]. They also paid $134 million in restitution to Tyco and criminal fines of $70 million and $35 million, respectively.

The final settlements are still subject to approval by a federal New York judge.”

SEC is just jumping right into these things, huh?  Part of the problem is that soo many of these scams/failures can be detected long before they blow up.  The SEC needs to get more aggressive in their approach.

For more on the story click here.

These types of programs are all well and good but a fundamental issue remains and that is the SEC actually taking action against the fraudsters in the industry.  Until the SEC starts using the tools it has to catch the fraudsters, even the very obvious ones (for example: Madoff), investor confidence will remain lower than it could and should be.

For more information on this story ,click here.

The investment scheme was a classic example of the Ponzi scheme. The funds that were supposed to be invested in foreign currency exchange were used to pay “returns” to select investors. Investor money was also used for the Son’s personal expenditures, including mortgage payments on a multi-million dollar house. The money also provided Son’s wife a salary she did not work for.

SNC Asset Management, Inc. (SNCA) and SNC Investments, Inc. (SNCI), were the two companies that Son and Chung coordinated to get the attention of investors. Manipulated profits and fabricated annual returns attracted many investors. The forex trading profits were fabricated and investors had monthly account statements with fake returns.

As the Ponzi scheme collapsed, Son and Chung drained the money out of these two companies and transfered investor funds into accounts overseas. The SEC is taking court orders to prevent these men and their companies from violating laws in the future and is also taking steps to provide emergency relief for investors. The Commodity Futures Trading Commission has announced civil fraud charges against Son, Chung, SNCA, and SNCI.

For more on the story, click here.

• Each firm will offer to purchase ARS at par from individuals, charities, and small or medium businesses that purchased those ARS from the firm, even if those customers moved their accounts.
• Each firm will use its best efforts to provide liquidity solutions for institutional and other customers and will not take advantage of liquidity solutions for its own inventory before making those solutions available to these customers.
• Each firm will pay eligible customers who sold their ARS below par the difference between par and the sale price of the ARS.

The SEC is clearly trying to do its job by increasing accountability especially in these difficult financial times.  But as the economic outlook looks brighter for the coming years, the propensity of fraud is only going to increase.

It is an unfortunate set of circumstances that permitted these ARS ‘markets’ to exist for such a long time when at any point the broker/dealers that sustained the markets could back away causing exactly what happened.  If perhaps the SEC had had the true authority and legislative/executive mandate in years past they could have intervened to create a more ordered dismantling of the

Quotations/information on this event was obtained from the SEC’s website, linked here.

Countrywide did not reveal to shareholders that in fact it was, according to the SEC, “an increasingly reckless lender assuming greater and greater risk.”

But at least Mozilo did not make too much profit. Oh, wait, yes he did! He made a nice tidy little sum of $140 million in profits by selling stock in the company. At least that’s what the S.E.C. says, but what do they know?  And other top Countrywide execs involved in the company at the relevant time are named in the allegations too.

I again ask the question – did any of these very well compensated executives do any of it legitimately? More evidence here that the answer is, emphatically, no.