Former UGA Coach Accused of Operating a Ponzi Scheme

‘Expert’ analyses and saw-it-with-my-own-eyes observations are worthless until you have done so.

If you sell a car or a television on Craig’s List and the buyer isn’t happy, there isn’t much he or she can do.  You don’t need a license to sell your old car or your old television, and the damage is limited to the price of what you sold. If you are selling investments that meet the legal definition of a “security,” though, you have to have a license, because the damage you can do by selling securities can last for generations. (more…)

Are the Big Banks in China Running Ponzi Schemes?

All that glitters in China is not gold.

For awhile now, people have been attuned to the incredible opportunities for investment in China. A relatively untapped market of more than 1 billion people is hard to ignore. But, as evidenced by several SEC enforcement actions alleging fraud by Chinese companies, all that glitters in China is not gold. The Financial Times has been covering one such glittering investment product. According to FT: (more…)

Hedge Fund Manager Tagged for Fraud

Hedge fund investing carries a level of fraud risk that can never be disclosed away in the boilerplate of a private placement memorandum.

The CV is impressive. MBA from Harvard Business School. Harvard instructor. Wall Street analyst. Published author. Fluent in Mandarin. Columnist for The New York Daily News. Executive of public companies. Interviewed eight times in Barron’s. Hedge fund manager. How could someone so accomplished decide that cheating investors was necessary to his continued success? A recent story from InvestmentNews, reporting on an SEC enforcement action, tells the tale: (more…)

Another Chinese Chairman Tagged by SEC

Just because a Chinese company is listed on an American exchange, does not mean that its leadership is accustomed to complying with American investor protection law.

The SEC is well aware of the danger posed by Chinese companies trading on American exchanges. It has brought several enforcement actions over the past year against such companies and their officers, sometimes for conduct that is shocking in its brazenness. This month, the SEC filed another that deserves mention in that category. According to the SEC’s press release: (more…)

Death Penalty for Ponzi Operator

If the death penalty cannot deter investment fraud, can anything?

As we detailed yesterday, China has an investment fraud problem. We can empathize with the Chinese, and perhaps wish that penalties for financial fraud were as stiff here as they are in China. According to Reuters: (more…)

SEC Tags Officials at Chinese Company with Market Manipulation

And vigilant investors strive to see things as they are, rather than as they would like them to be.

Gather round vigilant investors and pretend that you are the head of a public company. You’ve just gotten news from a potential source of much needed financing that you cannot have the loan you seek because the company’s stock does not trade actively enough (on the average day, only about 18,000 shares change hands).  The lender is concerned that the relatively low volume of trading means that not many people are interested in the company. The lender tells you that if the stock traded at more than 100,000 shares per day, you could have the loan. Without that loan, you are going to have to shutter the company. What do you do? (more…)

SEC Charges Chinese Nationals with Audacious Looting

Who but a knucklebuster could convince someone to do something so far over the line?

The People’s Republic of China (PRC) is opening up, bit by bit. Investors have long appreciated what that means: potential access to a previously untapped market of more than 1.3 billion consumers. Unfortunately, some investors have fallen in love, seemingly indiscriminately, with any investment with a Chinese connection. A recent SEC enforcement case demonstrates the dangers of doing so. According to the SEC’s press release (this is a longish press release, but well worth your time): (more…)

Bloomberg Story Highlights Dangers of Chinese Reverse Merger Companies

They can never shake a belief formed through their own experience.

The U.S. Securities and Exchange Commission (SEC) has formed a task force to address the rising threat from Chinese companies that trade on U.S. exchanges as a result of reverse mergers with publicly traded shell companies.  In a reverse merger, a privately held company mergers with a publicly-traded company with no operations. The resulting company’s shares trade on stock exchanges, rising and falling with the fortunes of the previously private company.  Many Chinese companies have become public that way. Investors conditioned to believe that any company that sells to China’s massive population is bound to succeed, snap up the shares, and the stock price rises. But China is rife with fraud. Sometimes the Chinese companies are outright scams. The insiders who control most of the now publicly traded shares are anxious to realize their profits. They therefore put out press releases that announce dramatic growth.  The stock price responds. The insiders sell at the increased price, and move on to the next scam. (more…)

Con Across the Strait of Taiwan

Fraud is the same the world over.

Many believe that the best place in the world to find growth opportunities is China. That might be.  But where there are profitable investments there are always frauds masquerading as profitable investments. This week came word from China of an alleged fraud operating across the Strait of Taiwan. According to The China Post: (more…)

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