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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: 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).