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from the don't-worry-they-got-you-covered dept.
http://www.reuters.com/article/us-platinumpartners-lawsuit-idUSKBN1481BI
Top executives of New York-based hedge fund manager Platinum Partners were arrested on Monday and charged with running a $1 billion fraud that federal prosecutors said became "like a Ponzi scheme" as its largest investments lost much of their value.
Led by Mark Nordlicht, Platinum was known for years for producing exceptionally high returns -- about 17 percent annually in its largest fund -- by taking an unusually aggressive approach to investing and fund management, as detailed by a Reuters Special Report in April. (reut.rs/1TRovwx)
Nordlicht, Platinum's founding partner and chief investment officer, was arrested at his home in New Rochelle, New York. Federal prosecutors accused him and six others of participating in a pair of schemes to defraud investors.
[...] Capers added that the case was one of the largest and "most brazen" investment frauds ever and Platinum was ultimately exposed to have "no more value than a tarnished piece of cheap metal."
Also reported on by Bloomberg here.
(Score: 2) by Rosco P. Coltrane on Wednesday December 21 2016, @12:18AM
Seriously, finance experts know early on the scammers' returns seem too good to be true - and as the saying goes, that's because it is. How hard can it be to investigate them before the everybody lose their shirts?
(Score: 2, Insightful) by Anonymous Coward on Wednesday December 21 2016, @12:40AM
> How hard can it be to investigate them before the everybody lose their shirts?
It takes cash to do investigations. And the SEC has been deliberately starved of funding by wallstreet's lackeys in congress.
(Score: 2) by Thexalon on Wednesday December 21 2016, @12:20PM
Also, the SEC is thoroughly corrupt. If an SEC officer gets close to having enough to bring criminal charges against any of the big players, then the company in question will offer them a really cushy do-nothing job as a means of stopping the investigation. They routinely rub elbows with the very people they're supposed to be regulating.
The result is the bad guys are almost never caught. For instance, they were tipped off about Bernie Madoff years before he was actually caught.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 2, Interesting) by Francis on Wednesday December 21 2016, @12:46AM
Not always, somebody conned my uncle out of quite a bit of money and the returns he was promising were completely reasonable. It's just that he was embezzling the money.
Cases like this start with at least some belief that they can do it, but over time they have to choose between coming clean and admitting that things aren't working, or continuing things via fraud.
(Score: 2) by Snotnose on Wednesday December 21 2016, @01:47AM
How hard can it be to investigate them before the everybody lose their shirts?
The smart ones go to wall street, the ones that don't make the cut go to the government.
When the dust settled America realized it was saved by a porn star.
(Score: 1) by khallow on Wednesday December 21 2016, @08:50AM
Why do Ponzi schemes still exist 100 years on???
Because they're easy to pull off. You can show amazing returns when your earlier investors are being paid off with the funds of your later investors.
And while I can't be bothered to investigate this story in detail, it does sound like a scam that didn't start that way. My belief is that there's a fair number of investment scams, which start as relatively sincere business efforts. But the people in charge get greedy, ambitious, and/or crazy and things go from there. It starts with some relative small things, like borrowing from the business or sexing up the yield by gambling a little and then the management hides what inevitably happens. That sets up the pattern of skullduggery behavior, increasing or doubling down on the problematic behavior and then covering up bigger and bigger messes. There are a variety of means and subterfuge by which these initial problems escalate into large scale failure and collapse.
A key indication that this probably wasn't intended to be a scam all along is the relatively long duration of the fund, 13 years. Scammers from the start generally are looking a quick payout. And anyone willing and smart enough to play such a long game probably has a better exit strategy than getting caught by the feds at home with at least half a year of warning (bonus points for discussing how to flee the country in email rather than actually fleeing the country).