Each business day HedgeCo.Net keeps you informed with the top hedge fund industry news, opinion and insight from around the globe. From the latest hedge fund launches, to the impact of regulation, competition, and investor activism - we track the topics and people that make a difference to you.
New York (HedgeCo.Net) – The SEC has located and halted a Ponzi scheme targeted primarily at deaf individuals in the United States and Japan.
According to the complaint, Hawaii-based Billion Coupons, Inc. along with its CEO Marvin R. Cooper was able to raise $4.4 million from 125 investors by holding seminars at Deaf community centers.
Cooper allegedly promised investors that their cash would be invested in Forex markets and returns would be in the 25 percent range. In reality, Cooper only invested $800,000 in Forex markets and lost over $750,000 from those trades.
When they couldn’t make their promised returns, they started the Ponzi scheme, where new money coming in is used to pay off older investors. The SEC alleges that Cooper misappropriated at least $1.4 million of those funds to purchase a new home and other personal belongings. The scam has been running since at least September 2007.
"A Ponzi scheme targeting members of the Deaf community is particularly reprehensible," said Rosalind R. Tyson, Regional Director of the SEC’s Los Angeles Regional Office.
The assets of BCI and Cooper have been frozen and a temporary receiver has been appointed. In addition to the SEC charges, the Commodity Futures Trading Commission filed an emergency action yesterday against the two, for violations of the antifraud provisions of the Commodity Exchange Act.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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New York (HedgeCo.Net) – Former chairman of the Nasdaq Stock Market Bernard Madoff was arrested yesterday and accused of orchestrating a ponzi scheme that bilked some $50 billion out of investors, authorities say.
The founder of Bernard L. Madoff Investment Securities allegedly has been running the scheme for years, using new money coming into the fund to pay returns to other investors, keeping up the façade of an admirable performance. In his alleged confession to the FBI, Madoff took the blame, saying he “paid investors with money that wasn’t there.”
According to the SEC complaint, Madoff informed two senior employees at his firm yesterday that he was “finished,” and that his business is “all just one big lie,” and “basically, a giant Ponzi scheme.” He also allegedly admitted that the firm was insolvent and had been for years.
“We are alleging a massive fraud – both in terms of scope and duration,” said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement. “We are moving quickly and decisively to stop the fraud and protect remaining assets for investors and we are working closely with the criminal authorities to hold Mr. Madoff accountable.”
Madoff, 70, posted bail at $10 million, backed by his Manhattan apartment and guaranteed by his wife.
"Bernard Madoff is a longstanding leader in the financial services industry," his lawyer Dan Horwit told reporters outside the Manhattan courtroom. "We will fight to get through this unfortunate set of events."
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
New York (HedgeCo.Net) – A prestigious New York City lawyer has been arrested and charged with masterminding a $100 million real-estate scheme that targeted large institutional investors and hedge funds.
Marc Dreier, of Dreier LLP on Park Avenue, was arrested on Sunday at LaGuardia Airport and is now facing both federal charges of securities and wire fraud, along with civil fraud charges filed by the U.S. Securities and Exchange Commission. In addition, Dreier was already dealing with criminal impersonation charges brought on by Canadian authorities.
"Our complaint alleges a stunning, brazen fraud that targeted some very sophisticated institutional investors," said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement.
Among the allegations, Dreier allegedly marketed bogus promissory notes that included ones tied to a real estate development company based in New York. Prosecutors said Dreier then covered it up by producing phony documentation and false financial statements to keep the investors from discovering the scheme.
According to the prosecution, Dreier convinced hedge funds to purchase these notes by highlighting the discount they would receive due to the original investors facing a cash crunch brought on by the current economic turmoil. Though the hedge funds weren’t specified, prosecutors say that one New York fund wired $100 million to one of Dreier’s accounts, while another fund in Connecticut wired about $13.5 million.
"This is a very complicated matter, and the facts are beyond reach of a sound bite," Dreier’s lawyer, Gerald Shargel told reporters at the scene.
Marc Dreier is a 58-year-old graduate of Harvard Law School. His bail hearing is scheduled for this Thursday.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
CFO.com – At 12:01 a.m. this morning, the Securities and Exchange Commission pushed out a new "emergency" disclosure rule that requires hedge funds and other large investors to disclose their short positions. The mandate is one of three new SEC investor protection rules that went into effect early this morning in response to widespread drops in stock prices in the wake of a liquidity crisis exacerbated by this week’s Lehman Brothers bankruptcy and sale of Merrill Lynch.
In a joint statement, SEC chairman Christopher Cox and SEC Enforcement Division director Linda Chatman Thomsen said that the rule, which is designed "to ensure transparency in short selling," will affect funds with more than $100 million invested in securities. Those fund managers, who are currently reporting their long positions, will now be required to "promptly begin public reporting of their daily short positions."
