Authorities in talks to tackle online Ponzi schemes

US regulatory and law-enforcement authorities are engaged in discussions about how to stop the worldwide spread of Internet pyramid schemes, following criminal indictments in Massachusetts against the owners of TelexFree Inc., who allegedly conducted a $1 billion global fraud. The talks involve creating a coalition of federal and state securities regulators, as well as law-enforcement agencies, who would in turn reach out to their counterparts abroad, according to two US officials with knowledge of the effort. The Department of Justice is among the parties participating in the process. More in the Boston Globe [...]

What’s Next for the Fiduciary Standard?

While the industry awaits a decision by the SEC on whether it will move forward with a uniform fiduciary rule for brokers and advisors, fiduciary advocates will engage this month in a debate about the importance of the two fiduciary rulemakings being considered by the SEC and the Department of Labor, as well as what the industry’s role should be in shaping fiduciary standards. As Fiduciary September approached—and with only three months remaining until SEC Chairwoman Mary Jo White’s self-imposed deadline for the agency to make by year-end a “threshold decision” on whether and how to move forward on a fiduciary rulemaking—I reached out to top fiduciary thinkers to get their views on where the commission may be headed. More on ThinkAdvisor [...]

Blurred Lines in Big Bank Mortgage Settlements

The latest settlement with a big bank, this time Bank of America’s $16.65 billion resolution over shoddy mortgage and related mortgage-backed securities that lost much of their value, has all the accoutrements we have come to expect: a claim of historic significance supported by a statement of facts referencing a few embarrassing e-mails to establish the requisite venality for a large penalty. A prominent feature is a news conference where Attorney General Eric H. Holder Jr. hails the resolution as yet another blow against the reckless (or worse) banking practices that led to the financial crisis. Like a graduation speech or school concert, however, the settlements start to run together with little to distinguish them. In the past year, JPMorgan Chase and Citigroup joined Bank of America in resolving investigations into mortgage operations, much of which took place in companies that the banks acquired during the financial crisis. More in the New York Times here.

Bank of America to pay record $16.65 billion to settle mortgage claims

Bank of America Corp. has agreed to pay $16.65 billion to end federal and state investigations into the sale of toxic mortgage securities during the subprime housing boom, the largest settlement by a single company in U.S. history, the Justice Department said Thursday. The settlement includes $9.65 billion in fines and $7 billion in aid to communities and homeowners hit hard by the housing market crash that triggered the Great Recession. More in the LA Times [...]

DOJ reaches $17B Bank of America settlement

The Justice Department on Thursday announced that it has struck an almost $17 billion deal with Bank of America to settle government charges over toxic mortgage-backed securities sold to investors in the years leading up to the 2008 financial crisis.
The settlement includes a record $9.65 billion fine and about $7 billion in aid for homeowners still struggling to make their mortgage payments and for potential buyers who have had trouble finding financing for new home loans. More on Politico [...]

How Madoff probe uncovered a hedge-fund scam led by ex-MIT professor

A former associate dean from the Massachusetts Institute of Technology school and his son, a Harvard Business School graduate have been caught running a hedge fund scam, say authorities looking at Bernie Madoff’s Ponzi scheme. Gabriel Bitran, a professor and associate dean at MIT’s Sloan School of Management, and his son, Marco, a money manager, have pleaded guilty to charges of conspiracy to commit securities fraud, wire fraud and obstruction of justice in connection with their hedge fund businesses, by Boston prosecutors. The father and son are facing up to five years in prison. More on MarketWatch [...]

Father, son to plead guilty in Madoff-tied scam

A former Massachusetts Institute of Technology dean and his son have agreed to plead guilty to criminal charges for running an alleged hedge fund scam that lost more than $140 million in investors’ money, according to federal prosecutors in Boston. Investigators said they discovered the scam while they unraveled Bernard Madoff’s infamous Ponzi scheme. Gabriel Bitran, 69, and his son Marco, 39, are accused of conspiracy to commit securities fraud, wire fraud and obstruction of justice in connection with their GMB Capital Management and GMB Capital Partners hedge fund businesses. More in USA Today [...]

Check Out — The True Horror Series Starring Fraud Street and You!

Forget House of Cards, Game of Thrones, Madmen, and all the other series you can’t wait to restart. There’s a new series out that beats them all. It went live yesterday on this channel. It’s free for the viewing, well, actually for the reading. It’s as shocking and scary as anything you’ll see in The Walking Dead.
No, there no pretend zombies eating your mother-in-law. Instead, there are real-life, crooked felons eating your lunch. They star, in Season 1, the JPMorgan Chase bankers who spent two decades laundering Bernie Madoff’s money without a single one going to jail or, it seems, even losing his job. Season 2 may feature other JPMorgan bankers (all of whom are not just walking the streets, but still managing people’s money) whose financial malfeasance has produced over $28 billion in JP Morgan fines over the past four years. Seasons 3 and beyond? No one knows. But Citigroup, Bank of America, Morgan Stanley, and Goldman Sachs and their bankers will, no doubt, play leading roles. More on Forbes [...]

SIPC’s Brokerage Account ‘Insurance’ Scam: Take It from a Comptroller of the Currency

SIPC’s Brokerage Account ‘Insurance’ Scam: Take It from a Comptroller of the Currency

I’ve invited James Smith, former Comptroller of the Currency and former Deputy Under-Secretary of the U.S. Treasury to discuss the Insurance Scam being run by SIPC. As I’ve discussed in prior columns posted at, this scam puts all brokerage account holders at extreme risk. Indeed, I strongly recommend every brokerage account holder close her account immediately pending passage of H.R. 3482 and S. 1725. I also strongly recommend that all SIPC-insured brokerage firms immediately disclose the huge risk to their clients of SIPC “insurance,” specifically that if they withdraw and spend enough of their account balances, they can a) lose any claim to SIPC insurance coverage on their remaining balance and b) also be sued for every penny they legitimately withdrew over the six years proceeding the discovery of fraud in their brokerage account. To avoid its insurance obligation and sue legitimate brokerage account investors, SIPC need only declare the fraud a Ponzi Scheme, which is easily done and which, as the NY Times, recently reported, are a dime a dozen.

Take It From a Comptroller of the Currency:

Congress Needs to Act Now to Protect Investors from SIPC “Insurance”

by James E. Smith

On September 25, 2000, eight years before the scams of Bernard Madoff and R. Allen Stanford were uncovered, Gretchen Morgenson (financial journalist for the New York Times) wrote a perceptive column of exacting detail describing the Securities Investor Protection Corporation’s pinched and adversarial practices aimed at favoring the SIPC Fund over protecting innocent customers of failed broker dealers. That column was “dead on” concerning SIPC’s regrettable culture, in which litigation rather than protection is too often the order of the day.


Claw back warning for Ross investors

Investors who managed to withdraw funds in recent years from the Ross Asset Management group of companies, found to be a Ponzi scheme, have been put on notice that the liquidators may try to claw back the cash. PwC’s John Fisk and David Bridgman said they have a valid claim on any funds withdrawn from the investment scheme since December 2010 under the Companies Act on the basis investors would receive more than their entitlement under a liquidation. The liquidators also believe they can make a claim on anyone who drew funds within the past six years under the Property Law Act on the basis they were part of David Ross’s fraud. The managers weren’t able to cut deals with three investors who withdrew some $3.8 million in the lead-up to Ross Asset Management’s collapse in 2012, and expect to “imminently” file proceedings in the High Court, they said in their latest report. More in the New Zealand Herald [...]