| If ever there was an argument for the | | | | nondisclosure agreements." |
| advertising ban on Hedge Funds to be lifted it is | | | | This 'secrecy' is what perpetuates the fraud. |
| this one. Over three years a brazen group of | | | | Simply put, the peddlers of this scheme will tell |
| New York scam artists raised about $30 million | | | | you that when you do your research that you will |
| from unsuspecting investors by posing as | | | | find everyone denying the existence of the |
| principals of a successful hedge fund and then fled | | | | scheme. They will say that those not in the |
| with the loot. | | | | industry don't know about it because there would |
| Investments from $5,000 to $500,000 were | | | | be outrage that rich people could make so much |
| obtained from college professors and educated | | | | money and those in the industry will deny it |
| professionals. It took the group a little more than | | | | because they either aren't high enough up or are |
| three years, from early 2003 September 2006 to | | | | trying to keep it a total secret. They will also tell |
| raise the $30 million. | | | | you that a minimum investment of $10mn is the |
| A grand jury empaneled by Michael J. Garcia, the | | | | norm, but they have split up that $10mn to allow |
| U.S. Attorney in Manhattan, is said to have handed | | | | their investors in. |
| up a sealed indictment in the case, according to a | | | | This secrecy is the perfect cover, and I speak |
| lawyer hired by 10 of the victims, who said that | | | | from personal experience, 15 years ago as an |
| the FBI was investigating the matter. | | | | investment pup, to my eternal shame, I got |
| The criminals are clearly to blame here, however, | | | | caught in a the same scam. |
| this is a problem that, in our opinion, is caused in | | | | So we have an 'investment' that is supposed to |
| part, by the regulators themselves. | | | | be super secret, has a minimum investment and |
| There is a scam out there that is based on | | | | is not advertised anywhere. Do elements of this |
| "Prime Bank Guarantees" or "Medium Term | | | | ring any bells? |
| Notes" that has taken billions from investors with | | | | Simply put, the regulators are perpetuating the |
| promises of astronomical returns. The SEC web | | | | 'secrecy' of hedge funds by not allowing |
| site says: | | | | advertisement of the funds. Their rules about only |
| "Lured by the promise of astronomical profits and | | | | being able to invest a certain amount of money |
| the chance to be part of an exclusive, | | | | did not protect the people in this case who |
| international investing program, investors are once | | | | invested $5000, did it? Something tells me the |
| again falling prey to bogus "prime bank" scams. | | | | scammers did not check to see what the net |
| These fraudulent schemes involve the purported | | | | worth of the investors was either. |
| issuance, trading, or use of so-called "prime" bank, | | | | How would advertising funds have helped? As |
| "prime" European bank or "prime" world bank | | | | with everything, the fact that advertising is |
| financial instruments, or other "high yield | | | | allowed generates an awareness of a particular |
| investment programs" ("HYIP"s). The fraud artists | | | | industry. How many of you knew how to play |
| who promote these schemes often use the word | | | | poker before the online casinos plastered the web |
| "prime" – or a synonymous phrase, such as | | | | with advertising? My limit was 'Snap', now I am a |
| "top fifty world banks" – to cloak their | | | | stone cold poker shark. |
| programs with an air of legitimacy." | | | | By the very nature of advertising and, therefore, |
| The thing that allows the bogus 'brokers' and | | | | informative web sites, brochures etc etc, this kind |
| 'investment managers' of this fraud to operate is | | | | of fraud would be more difficult to perpetrate |
| that they have created a veil of secrecy over | | | | because the veil of secrecy would be lifted for all |
| the whole operation. The SEC says: | | | | to see. |
| "Promoters claim that transactions must be kept | | | | Of course, there will always be criminal elements |
| strictly confidential by all parties, making client | | | | who will attempt to subvert whatever rules are |
| references unavailable. They may characterize the | | | | out there but the regulators throughout the world |
| transactions as the best-kept secret in the | | | | don't need to make it easy by perpetuating a |
| banking industry, and assert that, if asked, bank | | | | secrecy myth that can be exploited by the |
| and regulatory officials would deny knowledge of | | | | criminal element. |
| such instruments. Investors may be asked to sign | | | | |