FBI Nabs Fugitive in the Land of 10,000 Scams

A vigilant investor can step outside his or her thoughts and analyze them.

Dan Browning covers investment fraud for the StarTribune. He’s covered the Trevor Cook case, the Tom Petters case, and the innumerable other investment cons that have swindled investors worldwide. Last week, Dan covered the story of Michael J. Murphy, whom the FBI arrested in a mental hospital in Fargo, North Dakota. Murphy, it seems, had failed to appear at a court hearing in North Carolina to answer charges that he participating in a Ponzi scheme. Browning writes: (more…)

SEC Squashes Gold Bug

Scams often track the headlines.

“Scam artists track the headlines more closely than the most energetic news junkie.” — The Vigilant Investor, p. 121

Gold prices have doubled since January 2009. News like that catches the attention of even the most casual investor. People start wondering whether they have missed an opportunity, or whether it isn’t too late to jump onto a rising rocket. It’s that kind of public attention that launches hundreds of scams every year. The SEC believes that it has found an investment that took advantage of rising gold prices. According to the SEC’s press release: (more…)

Top Credentials Will Lead You Astray

Federal prosecutors in Minnesota have accepted a guilty plea in an investment fraud case that cries out for a fresh discussion of credentials — what they mean and what they don’t.

Kirk S. Wright earned a master’s degree in public policy from the Kennedy School of Government at Harvard University in 1995.  Thirteen years later, on May 24, 2008, he hung himself in his cell at the Union City jail near Atlanta after being convicted of defrauding hundreds of people out of more than $185 million.  - The Vigilant Investor, p. 42.

Marc Dreier has impressive credentials. After earning an undergraduate degree from Yale and a law degree from Harvard, Dreier worked at some of New York’s most prestigious law firms before opening his own firm, Dreier, LLP in 1996. — The Vigilant Investor, p.116.

I begin this post with those two quotes from The Vigilant Investor because this post is about credentials. Federal prosecutors in Minnesota have accepted a guilty plea in an investment fraud case that cries out for a fresh discussion of credentials — what they mean and what they don’t. According to InvestmentNews: (more…)

No Cure for Investment Crime

The professional criminal is at the heart of the fraud and convinces the bunglers that the investment is legitimate.

Science has made amazing breakthroughs in the treatment of disease. Penicillin and the polio vaccine jump to mind. But there is no cure for the disease that leads to investment crime. There will never be a vaccine that cures our human tendency to put ourselves first — often to the detriment of other humans — which plays out with such devastating results in those who follow that impulse into investment fraud. (more…)

“You Mean I Could Invest in a Ponzi Scheme Through a Well-Known Brokerage Firm?”

There are things you need to know about how your broker operates that your broker wouldn’t tell you even if you waterboarded him.

I get the question all the time. I’ve criss-crossed the country twice already this year speaking about investment fraud and sound due diligence methods. It’s the rare occasion when someone doesn’t come up after the speech and ask something like this:  ”My money is at ______ (fill in the blank with the name of a well-known brokerage firm), so I don’t have anything to worry about, right?” They are always disappointed with the answer: “Not necessarily.” Every year, hundreds-perhaps thousands-of investors lose tens-perhaps hundreds-of millions of dollars in Ponzi schemes sold by brokers for the same well-known firms whose commercials play during golf tournaments and NFL games. There is really only one difference between the firms you’ve heard of and the ones you haven’t: the marketing budget. A recent story from InvestmentNews makes the point: (more…)

Con Touches Phil Mickelson

Scamsters often become someone else for successive schemes.

In 1986, Chuck Yeager, the first man to break the sound barrier, filmed a promotional video designed to convince coin collectors to buy silver coins offered by Michael Joseph Krzyzaniak. Proceeds from the purchase of the coins, Krzyzaniak said, would fund a memorial to be placed next to Mt. Rushmore. Unbeknownst to Yeager, the promotion was a scam. Krzyzaniak skipped bail, but he ultimately served three years in prison. Like most con artists, though, Krzyaniak’s career survived his prison stretch. Federal prosecutors in Minnesota are now pursuing him for his latest scams.  According to the StarTribune: (more…)

SEC Alleges Affinity Fraud at Hindu Temples

Read the SEC’s materials on affinity fraud, and stay away from anyone who even subtly uses faith in connection with an investment pitch.

The U.S. Securities and Exchange Commission has shut down what it alleges to be an affinity fraud operating against Indian-Americans.  The Commission has charged Amit V. Patel (“Patel”), of Shoreview, Minnesota, with defrauding money from investors he met at Hindu temples in Minnesota.  According to the SEC’s press release: (more…)

Charities At Double Risk From Investment Fraud

How can a charity protect itself against this back-door damage? It can be on the lookout for large donations from newly wealthy contributors, and investigate them before putting their money to work.

A recent article in the Chronicle of Philanthropy highlights how charities are at double risk from investment fraud.  Professional scamsters love to target charities.  The modern resurgence of the prime bank scam began in the early 1990s when an organized crime figure defrauded the Salvation Army out of more than $4 million.  But, beyond being a direct victim of investment fraud, charities can find themselves victimized by contributors who give stolen money. (more…)

Twenty-Five Year Sentence in Minnesota Ponzi Case

Unfortunately, even if every judge handed out the maximum sentence to every convicted investment fraudster prosecuted in his or her court, there would still be enough operating fraudsters to cost every investor his or her life savings many times over.

Prison does not deter Ponzi scamsters; they are not law-abiding types.  But it can keep known Ponzi scamsters out of circulation for awhile.  Last week, U.S. District Judge James M. Rosenbaum in Minneapolis modeled the sentencing that ought to be routine in cases involving investment fraud when he sentenced Trevor Cook to the maximum possible sentence — 25 years in prison.  We wrote about Cook’s $190 million foreign currency Ponzi scheme back in April. (more…)

If Your Investment Adviser Buys an Historic Mansion, Get Your Money Out Fast!

But extravagant spending is such a sure-fire predictor of investment fraud that the SEC could roll up almost every operating scam by getting a list of investment advisers and stockbrokers who own a Bentley, a Maserati, or a Lamborghini.

The Van Dusen mansion is a landmark in the Twin Cities.  A 12,000 square monument to grain processing and distribution, the mansion is listed on the National Register of Historic Places.  In 2007, Trevor G. Cook bought the mansion for $2.8 million with the proceeds of what people believed to be his successful foreign currency trading.  This week Cook pled guilty to operating a $190 million Ponzi scheme. (more…)

Alleged Post-Madoff Ponzi Shows the Mark of the Master

Third, and most importantly, notice that Brown promised only annual returns of eight to nine percent. If the SEC’s allegations are true, this is where Brown shows that she was paying attention in Professor Madoff’s class.

Since the 2008 revelation of Bernard Madoff’s epic scam, we have been warning that scamsters would learn lessons from Madoff’s success in operating a Ponzi scheme for three decades, and that those lessons would make financial scams harder to spot.  The SEC has filed charges in a case that bears out that assessment. (more…)

SEC Secures Asset Freezes in Connection with Alleged $190 Million Fraudulent Offering

At the request of the U.S. Securities and Exchange Commission (“SEC”), a federal court in Minnesota has shut down an alleged foreign currency trading scam that raised more than $190 million from more than 1,000 investors worldwide.  According to the SEC, Trevor G. Cook and Patrick J. Kiley, both of Minnesota, used a number of [...]

At the request of the U.S. Securities and Exchange Commission (“SEC”), a federal court in Minnesota has shut down an alleged foreign currency trading scam that raised more than $190 million from more than 1,000 investors worldwide.  According to the SEC, Trevor G. Cook and Patrick J. Kiley, both of Minnesota, used a number of companies and shell companies in connection with the scam.  The companies allegedly involved include UBS Diversified Growth LLC, Universal Brokerage FX Management LLC, Oxford Global Advisors LLC, Oxford Global Partners LLC, Basel Group LLC, Crown Forex LLC, Market Shot LLC, PFG Coin and Bullion, Oxford FX Growth L.P., Oxford Global FX LLC, Oxford Global Managed Futures Fund L.P, UBS Diversified FX Advisors LLC, UBS Diversified FX Growth L.P., and UBS Diversified FX Management LLC.

(more…)

 

Trusting the County Sheriff

Its human nature to trust certain people — your loved ones or someone in a position of power.  How about your local sheriff?  Because he or she is someone who fights crime on your behalf and protects your family, you naturally trust him or her.  But don’t be so sure…

Its human nature to trust certain people — your loved ones or someone in a position of power.  How about your local sheriff?  Because he or she is someone who fights crime on your behalf and protects your family, you naturally trust him or her.  But don’t be so sure… (more…)

 
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