Posts Tagged ‘madoff’

It is no Madoff Ponzi but It is bad enough: SEC on the ball in stopping a Ponzi scheme

Sunday, March 7th, 2010

This type of scheme is not unique or novel in any way. It has been happening, and undoubtedly is currently happening, for decades and probably centuries. This particular scheme targeted Los Angeles bus drivers on the verge of or just about to retire. The alleged fraudsters apparently convinced bus drivers to take lump sum retirement benefits and entrust them to the alleged fraudsters.
The Savage Law Firm had dealt with victimes of this type of scheme before and unfortunately probably will again.
Kudos to the SEC for stopping this before it got too large, but these schemes are difficult to detect unless an investor or potential investor alerts a law firm and/or the SEC or other governmental organization to look into it.

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.

SEC Proposes Several New Measures Aimed at Increasing Corporate Accountability and Improving Investor Confidence

Thursday, February 25th, 2010

On July 1st, the SEC voted on several new measures that were aimed primarily to increase investor confidence by providing investors with tools to increase corporate accountability. First, the commission approved a measure that requires a shareholder vote on executive pay in proxy solicitations involving companies that receive money from the Troubled Asset Relief Program (TARP).  The Commission also voted to propose a measure requiring public companies  better disclosure of executive pay in their proxy statements. A New York Stock Exchange rule was changed as well, as the SEC now prohibits brokers from voting proxies in corporate elections without customer input.

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.

Madoff Fallout: Bank Medici Loses License

Thursday, February 25th, 2010

Bank Medici AG lost it’s banking license this past Thursday.  The financial banking authority of Austria, the Financial Market Authority, took action because the bank’s starting capital mark dropped below the 5 million Euro requirement.  Bank Medici claimed that it suffered huge losses due to Madoff’s massive Ponzi scheme.  The bank noted on its website that it will still fight in the interest of its clients and make its decisions accordingly.

Read the full story here.

Stanford Group Follow-Up (and shocker!)

Thursday, February 25th, 2010

Another shocker:  Nigel Hamilton-Smith, the Antiguan liquidator of the Stanford Group’s offshore bank testified that Stanford used client funds to fuel his conspicuous consumption.

The Texas financier has been accused by U.S. regulators of a $8.5 billion fraud.

For more on the ongoing case, click here and/or see my earlier post.

Interesting Twist In Hedge Fund Manager Stock Fraud Charges

Thursday, February 25th, 2010

The twist is not soo much that he got caught with his hand in the proverbial cookie jar.

Mark Bloom, the former manager of the North Hills Management hedge fund based out of New York, was able to start and operate North Hills separately while he was working for another money manager (which, by the way, is also involved in a $500+ million fraud complaint).  Bloom claims that he will be using a public defender to defend the stock fraud charges against him.  After one of the biggest investors in North Hills Management demanded redemptions and Bloom evaded those request, the investor, a charity, sued because the charity believed that Bloom was using hedge fund money for personal conspicuous consumption.

For more on the story, click here.

Madoff Update: “Deeply flawed individual” sentenced to 150 years but says he’s sorry…

Thursday, February 25th, 2010

His own lawyer calls him a “deeply flawed individual” and I nominate that for the understatement of the recession.

Madoff’s fraud is an almost unbelievable scam, spanning a reported $170 billion dollars through his company, decades of time, abuse of untold friendships, and destruction of tens, hundreds, maybe thousands of peoples’ lives.  This is not a scam limited to the primary vicitims, no, this scam has destroyed many families for generations to come because soo many invested everything they had.

But Madoff says he’s “sorry.”  Due to the type of damages these cases do to families, retirees, and anyone touched by the scam, I am not sure “sorry” does it.  I think spending the rest of his life confined in a spartan cell with plenty of time to think about all the horror he inflicted and to feel all the anguish and loss of his victims, but maybe that gives him too much credit because I don’t think he has any ability to respond as a human.  How coudl he?  He launched this scam decades ago and instead of unwinding it if not giving himself up, he only pushed harder to scam greater and greater amounts of money from more and more people.

Did he have no thoughts for what he was doing and no understanding that it would all wind up a massive train wreck?

Did he even try to invest the money?  It sounds like the answer to that is “no.”  Instead used the loot, because that’s what it was, to benefit himself and his family.  He didn’t even try to invest the money – everything was a scam from his published returns (shame on the SEC, too)  to his monthly account statements where he did not even take the time to make sure that his statements were even remotely accurate.

Madoff is less than human most would agree.  But is it only that he is perfectly human?

Can a human be soo epically flawed and still function in society as he did for decades?  I suppose so.

Maybe money is the root of all evil after all.

Madoff Fallout: SEC Charges Madoff Solicitors and Feeder with Fraud

Thursday, February 25th, 2010

A New York broker-dealer and four other individuals were charged with securities fraud by the SEC. It was alleged that they collectively raised billions of dollars illegally from investors to feed Bernie Madoff’s Ponzi scheme.

The legal complaint filed in a Southern District of New York U.S District Court lists the Cohmad Securities Corporation of being at fault. Chairman Maurice J. Cohn, COO Marcia B. Cohn, and representative Robert M. Jaffe were charged of marketing investment with Madoff without regarding the illegality of his Ponzi scheme. The same court filed a complaint against Stanley Chais, an investment adviser who handled three funds valued nearly at 1 billion dollars that were totally invested with Madoff.

Robert Khuzami, Director of the SEC’s Division of Enforcement, noted that:

“Madoff cultivated an air of exclusivity by pretending that he was too successful to trouble himself with marketing to new investors..In fact, he needed a constant in-flow of funds to sustain his fraud, and used his secret control of Cohmad to obtain them.”

The Cohmad defendants were indicted for fraud due to their peculiar apathy towards Madoff’s suspicious activities. For example the Cohns filed Forms BD and FOCUS reports that were falsified to hide Cohmad’s business of attracting investors to Bernard L. Madoff Investment Securities LLC  (BMIS). The referral business was 90 percent of Cohmad’s revenue bringing in over 800 accounts and billions of dollars for BMIS. BMIS paid 100 million for Cohmad’s referral services. The compensation arraignment between the two entities created fraudulent conduct as well, with clients unable to withdraw money from accounts with false account statements.

Jaffe, the registered representative at Cohmad, brought in more than 1 billion into BMIS. Jaffe though he was getting overcompensated by Madoff when really BMIS employees were taking money out of Jaffe’s BMIS account.

Chais’s charges centered around his false role in managing the funds and for distributing false account statements. Chais built himself up as a qualified investor managing hundreds of millions of dollars worth of money with three partnerships. But Chais only sent them money out of one of his partnerships to BMIS and then proceeded to charge that partnership for his “service.”  Chais apparently also ignored blatant inconsistencies with Madoff’s reported returns, and even encouraged them.

The article is linked here.

Another Stanford Group Follow Up…

Thursday, February 25th, 2010

R. Allen Stanford was taken into custody on his Ponzi scheme allegations related to his international banking empire.  Because the judge agreed that Stanford poses a flight risk the judge ordered him to remain in custody.

The government’s indictment charged Stanford and other executives at his firm with scamming 30,000 investors invested $1.2 billion in assets and in about 7 years grew it to about $8.5 billion.

Investigators say that even as Stanford claimed healthy returns for those investors, he was secretly diverting more than $1.6 billion in personal loans to himself.

Ponzi Scheme Victims: “Throw the Book, Judge!”

Thursday, February 25th, 2010

Many of Madoff’s victims sent impassioned letters asking the judge to give Madoff as much time in prison as possible.  Some of them have even asked for a chance to speak at the June 29 sentencing hearing.

The letters are wrenching because many of Madoff’s victims are elderly and retired who have lost everything to Madoff’s greed.

For more, including a link to these moving letters, click here.

Madoff ‘Feeder Funds’ Suing Mad – And Playing Offensive Defense

Thursday, February 25th, 2010

Now more ‘feeder fund’ investors are suing Madoff along with others.  These two feeder funds are looking to recoup approximately $3.5 billion in alleged losses.  Kingate Global Fund Ltd. and Kingate Euro Fund Ltd. filed their lawsuit in US District Court in Manhattan this week.

The lawsuit alleges that “[r]eportedly, over $3 billion was invested in Kingate Global and Kingate Euro, and virtually all of those moneys were funneled to Madoff.”  A few months ago these two Kingate funds were sued by the trustee of Madoff’s investment company.  The trusteee, Irving Picard sued to recover $255 million withdrawn from Madoff’s firm between October and November 2008.  Picard’s lawsuit named fund manager Kingate Management Ltd.; Grosso’s FIM Advisers LLP, which acted as a consultant to the funds; and others as defendants.

The feeder fund lawsuit is an attempt to deflect the allegations made by the Madoff investment firm trustee Irving Picard that these two funds illegally profited from their association with Madoff.

The feeder funds will try to defend by saying they were victims too.

Time will tell, but if these money managers are half as astute as they (used to) like the public to believe I am not sure they will make a strong case.