Posts Tagged ‘stock loss’

Forex Trading Fraud: SEC tackles $80 million Ponzi Scheme

Thursday, February 25th, 2010

Today, the SEC charged Peter C. Son and Jin K. Chung guilty of conducting an 80 million dollar Ponzi Scheme that involved nearly 500 investors.  The scheme targeted Korean-American investors with the false promises of giant returns from forex (foreign currency) trading.

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.

Countrywide’s Ex-Chief Charged with Securities Fraud?! Gasp!

Thursday, February 25th, 2010

Well said by the SEC’s enforcement director when he said it was a ‘tale of two companies.’ Apparently Angelo Mozilo was sending e-mail messages describing Countrywide loan products as “toxic” and “poison” at the same time as he was, guess what? Wait for it. Right, he was telling the public that Countrywide was underwriting mainly prime-quality mortgage and using strong underwriting protocols.

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.

Five Ways to Guard Your Money

Thursday, February 25th, 2010

It is always a good idea to keep an eye on your money, especially these days and there are many simple ways to guard your money, including these tips from the Wall Street Journal.

1. “Do your homework when picking a financial adviser.”

2. “Ask tough questions to identify potential conflicts of interest.”

3. “Ask tough questions about risk factors.”

4. “Check whether the fund manager’s interests are aligned with yours.”

5. “Check whether the fund firm ’s interests are aligned with yours.”

These steps seems fairly intuitive, but they do definitely merit Post-it or checklist worthy status for any investor.

For more on the details and rationale behind each step, 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.