Another Ponzi Schemes- 'only' $400 Mio go missing

Never invest on the word of a good friend or well-regarded person (in politics, media, business) without getting a second opinion from an independent professional who has no stake in the proposal - be it a fee or being involved in the investment in any form or shape.

San Diego Magnate Masterminded $400 Million Liquor License Scam

and another Scam, this one 'only' for $18.5 Million:

 Private Investigator Tech Startup Charged in $18.5 Million Fraud

this one is 'only' for $25 Million:

Cryptocurrency Firm Co-Founder Pleads Guilty to Coin Offering Fraud  

and another $60 Million changed hands:

Investment Adviser CIO Charged with Running Ponzi-Like Scheme

ICO? Do not buy what you do not understand

Initial Coin Offerings (short ICO) are an offshoot of the Cryptocurrency Craze, of which Bitcoin is the most prominent product. Quite apart from the fact that most (not even financial experts) do not really understand the concept of ICO's in many cases the use to which the proceeds - your money! - is being put is also less than transparent. What protection do you get once your money is (hopefully) invested? How are profits (if any) shared between public investors and the promoters/insiders? I remain sceptical of all Cryptocurrencies - for better or worse we do HAVE a money and payment system that functions reasonably well. It only goes haywire if some crazed politicians get out of control (Venezuela, Argentina, Turkey for ex). Payments to anywhere in the world can be made in an instant and on superfine rates if you know where to look.
Too many ICO -peddle outright Fraud says regulator

Hottinger Fraud - Do not get to trusting

No comment needed - but any potential investor should read this and learn from the mistakes that the defrauded investors made.

Ex Hottinger Private Banker - what happened to customer's money

Beware of Investment Scams!

Nearly a decade after Bernie Madoff, Americans are still losing their life savings to Ponzi schemes.

It is difficult for ordinary investors and savers to identify swindlers and conmen. PBAdvisory can help you with due diligence and allow you to follow the old principle: Investigate before yu invest! It is surprising how often investors neglect to conduct the most basic background checks before parting with their hard-earned money.

Marketwatch

Should you let Friends manage your Portfolio?

It may be tempting to let a friend manage your portfolio. He or She may be more familiar with the world of money, - or at least give that impression. You may save on fees and prefer to interact with someone you think you know well.
But watch out! Is your friend really running his own - let alone somone else's - money well? How is the track record, especially in turbulent markets, and when a stomach-churning downturn occurs, such as we have seen in 2008-09?
You have little protection if something goes wrong either due to mismanagement or even worse - fraud. It has happened before many times and given human nature it will happen again.

http://www.telegraph.co.uk/investing/funds/could-fund-manager-next-door/ (Daily Telegraph)

Fraud Watch

Credit Suisse, the Jailed Banker and the Oligarch's Millions (Bloomberg)

Should you check the lifestyle of your Financial Adviser?

Two recent cases involving multi-million investment scams have both highlighted the expensive lifestyles of the main promoters. This raises the question if investors would be well advised to conduct a background check on the personal life of any current or prospective investment adviser. I would tend to say yes as the time when you could rely on self-restraint as demonstrated by the legendary old school Swiss Private Banker are long gone. Ostentatious lifestyles that involve million-dollar birthday parties where rock stars serenade the guests and over-the-top spending on art or property should always flash red warning lights.
See also 'Long jail terms for three fraudsters in £85 million boiler room scam' (Daily Telegraph)

Heads I win, Tails you lose

A potential source of fraud that most investors do not know much about concerns the allocation of trades. It is critical that investment advisors or fund managers are not able to allocate winning trades to favoured accounts or funds - or even to their own investment accounts. A recent example is found here (Los Angeles Times)

How to protect your money

We repeatedly warn against the dangers presented by investment scams. A few simple rules (Marketwatch) should be enough to weed out the most obvious frauds but that leaves the question of how to make sure that investment advice you get from reputable firms is as good as is promised in the glossy brochures you receive from them. A key rule should be to always ask for their (published) performance record and make sure that the way your portfolio will be managed in way so that it will match the performance of the model or master portfolio. All-too-often individual advisers are left to handle the client's portfolios which means that different clients get wildly diverging investment results even as they are clients of the same firm. When the adviser gets hefty bonuses based on the commission he generates from the customer account there is an extra risk that your interests will not be served in the best possible fashion. Even worse is a situation where the financial adviser consults with you before making any investment decision. While this may flatter the ego of many a client it also gives the adviser an escape when things turn out badly. He will put the blame on you and 'the market' while happily pocketing his 'advisory' fee.

Investment Scam Watchlist

$500 million ponzi scheme uncovered - Intelligence no proof against Greed (Handelsblatt)

Ex-Hedge Fund CEO Pleads Guilty to $4 Million Fraud (Bloomberg)

Former stockbroker faces jail over £32 million fraud (Daily Telegraph)

 
Japanese Asset Management fraud may have cost investors $2.49 billion (Reuters)

Smart Investors fell victim to $1 billion scam (Barron's)

Even arbitration no protection for investors

This case demonstrates that investors should not rely on securities arbitration for his protection as providers of financial services use every legal option to delay or void such an award. The reader can form his own judgement about the morality of such conduct.

How to spot an investment scam

An suspected investment scam involving the sale of derivatives linked to gold has been uncovered in Poland (Wall Street Journal). Based on preliminary evidence the following lessons can be learned: (1) Always check out the credentials of senior management, (2) Do you really understand the investment? In this case I doubt that many - if any - of the investors understood the difference between physical gold and derivatives, (3) Unusual and high marketing expenditures.

Minneapolis Doctor is defrauded in $7 Million Scam

Just another example illustrating that due diligence is essential when selecting a money manager. Full Story here (StarTribune)

Who protects the investors?

When reading that the justice authorities in the Swiss canton of Ticino have completed their investigation into the bankruptcy of Sogevalor, a financial advisory firm that went out of business in 2004 (!) one has to ask who - if anyone - is really protecting investors from fraud and malpractice. Those responsible for Sogevalor's demise - and the alleged fraud that cost investors up to Sfr 130 million - have not even been charged and may well escape any formal prosecution. Even under most optimistic assumptions a court case could be a protracted procedure - especially when a lengthy appeal process is adopted. By that time quite a few of the investors - and maybe even those eventually found responsible - may no longer be in this world. The lesson from this and similar cases should be: BUYER BEWARE! Investors should only part with their money after careful investigation. A clear separation of the safekeepking (custodial) function and the investment advisory role would be the optimal solution we recommend.

Private Banker diverts Sfr 1.5 million and escapes jail!

The selection of an trustworthy financial adviser is of the utmost importance. While no customers of the bank in question have lost any money the case case should still set alarm bells ringing. When the director of a bank can escape a prison sentence even after he admitted that he 'diverted' Sfr 1.5 million from commission payments to his own accounts the sentence demonstrates that crimes by banking and finance professionals are still not punished in the same way as crimes by 'ordinary' criminals and investors should be extra careful when selecting a financial adviser. That the banker in question enjoyed a basic annual salary of  Sfr 240'000 and at one stage received an annual bonus of Sfr 816'000 is proof for the extent of his greed.

'Vaporized' MF Global Funds - Insult added to Injury

"The theft of customer funds was bad enough, but the manner in which the exchange, the regulators, the court, the Congress and the Obama Administration have dealt with the aftermath of this is truly despicable." (Jesse's Cafe Americain)

When lawyers become greedy

A sobering reminder of the problems investors can face when they use a lawyer to get compensation for fraud or misdemeanour they suffer at the hands of a financial adviser. Dealing with a (real or imagined) compensation claim is a complicated affair and people are in most cases facing no option but to trust the legal expert once they have asked for his services.

Hopes fade on MF Global Funds

A new term enters the financial dictionary: sources state that $ 1.2 Mio in supposedly segregated customer funds may have been 'vaporized'. Just in case you ever thought you could or should rely on financial regulators or their taskmasters the politicians.

How safe is your Fund?

The regulation of investment funds is contained in voluminous tomes in most countries. In addition supranational entities like the EU add their own regulations. So should the investor assume that any fund issued by a regulated investment firm is safe from fraud and malpractice? We have repeatedly warned that even investment funds domiciled in 'developed' countries like member states of the EU are not automatically fail-safe. Apart from the question how small countries like Luxembourg, Ireland or Malta could afford to reimburse investors for substantial losses it is by no means clear that the wording of the regulations is such that the rights of the investors are defined in a sufficiently clear way. As ongoing court cases in Luxembourg demonstrate, rubber paragraphs allow to drag on court cases for lengthy times and fund providers try every legal trick to wear down the hapless investors who try to reclaim their savings.

Who is fighting your corner and watching out for possible fraud

A case brought against a prominent investment firm illustrates that investors need expert advice when faced with sophisticated money managers that may well have an information advantage and better knowledge of the investment products.