Florida Ponzi lawyer: partners involved in scam

The former Florida lawyer convicted of running a $1.2 billion Ponzi scheme claims both his partners at a now-defunct Fort Lauderdale law firm knew about and profited from the illegal activity, according to transcripts of testimony released Wednesday.
The disbarred attorney, Scott Rothstein, said in a sworn deposition that ex-partners Russell Adler and Stuart Rosenfeldt knew about and benefited financially from the Ponzi scam that collapsed in fall 2009. The scam involved investments in fake legal settlements.
Read Washington Post article here.

Alleged Ponzi schemer Vaughan pleads guilty, faces up to 12 years in prison

A former Albuquerque real estate executive has pleaded guilty to wire and mail fraud and agreed to serve up to 12 years in prison to settle charges he ran a multi-state Ponzi scheme.
Doug Vaughan entered the plea Wednesday in federal court in Santa Fe. Under terms of the deal with prosecutors, Chief Judge Bruce Black will determine the final sentence, which will range from 10 to 12 years. Read Associated Press report here. [...]

MF Global Holdings Says More Units Move Toward Bankruptcy

MF Global Holdings Inc. won permission to have three more units join it in Chapter 11 bankruptcy, as a lawyer said more units are likely to file for protection from creditors next year.
MF Global Capital LLC, MF Global Market Services LLC and MF Global FX Clear LLC can consolidate their cases with that of the parent company, U.S. Bankruptcy Judge Martin Glenn in Manhattan said today. The units sought protection Dec. 19 after a decision by the Chapter 11 trustee, Louis Freeh.
Read Bloomberg Businessweek report [...]

MF Global trustee reviewing firm’s practice of repledging collateral

The bankruptcy trustee for collapsed U.S. brokerage firm MF Global Inc. is looking into how the firm re-pledged customer collateral as part of its search for $1.2 billion of missing customer funds.
The practice, called re-hypothecation, has drawn renewed scrutiny after the failure of MF Global and experts said U.S. regulators may face new restrictions as part of efforts to increase protection on customer accounts. Read Reuters report [...]

Funds Sue Deutsche Over Deal on Claims

Two hedge funds filed a lawsuit accusing a Deutsche Bank AG unit of reneging on a $1 billion deal to buy their claims for losses in Bernard L. Madoff’s Ponzi scheme.
The suit, filed in a New York federal court by Kingate Global Fund Ltd. and Kingate Euro Fund Ltd., is a sign of the negative consequences of recent court decisions against the trustee overseeing the bankruptcy of Mr. Madoff’s firm. Read more in the Wall Street Journal [...]

Judge weighs whether Allen Stanford fit for trial

A prison psychologist who evaluated accused swindler Allen Stanford testified on Tuesday that it would be “incredibly rare” for a patient to suffer from the type of delayed memory loss the Texas financier says makes him incompetent to stand trial. The psychologist testified for the government at a competency hearing in U.S. District Court in Houston that will decide if Stanford’s criminal trial can go forward next month. Read Reuters report [...]

The Financial Crisis on Trial

The Securities and Exchange Commission’s lawsuits against six top executives of Fannie Mae and Freddie Mac, announced last week, are a seminal event. For the first time in a government report, the complaint has made it clear that the two government-sponsored enterprises (GSEs) played a major role in creating the demand for low-quality mortgages before the 2008 financial crisis. More importantly, the SEC is saying that Fannie and Freddie—the largest buyers and securitizers of subprime and other low-quality mortgages—hid the size of their purchases from the market. Through these alleged acts of securities fraud, they did not just mislead investors; they deprived analysts, risk managers, rating agencies and even financial regulators of vital data about market risks that could have prevented the crisis. Read more in the Wall Street Journal [...]

E-Mail Clues in Tracking MF Global Client Funds

Federal authorities investigating the collapse of MF Global have uncovered e-mails that detail the transfers of money in the firm’s last days, including transfers that contained customer money, according to people close to the investigation. One e-mail chain refers to the transfer of roughly $200 million that MF Global owed JPMorgan Chase on Oct. 28 — the firm’s last business day before it filed for bankruptcy. In that chain, a senior official in the firm’s Chicago office was told to make the transfer, said the people close to the investigation who requested anonymity because the inquiry was still open. Read New York Times report [...]

Citigroup’s proposed settlement with the SEC fits the norm

To much applause, Federal District Judge Jed S. Rakoff broke with the status quo on November 28 by refusing to approve a settlement between the Securities and Exchange Commission and Citigroup involving transactions in which the bank bet against mortgage-backed securities it sold to customers. Like many others in the financial industry – i.e., Goldman Sachs’s $550 million settlement with the SEC in 2010 – Citigroup had agreed to pay out a negligible sum of money to make the case go away without admitting to any wrongdoing. Outside of patently criminal acts like the insider trading scam involving Raj Rajaratnam or a Ponzi scheme like Bernard L. Madoff’s, securities cases usually played out in this manner. Read more in Forbes [...]

Bharara Adds Another Notch As Madoff’s Controller Pleads Guilty to Four Counts

Beginning in the late 1990s until the collapse of BLMIS in 2008, Cotellessa-Pitz and other conspirators created false and misleading entries in the books and records of BLMIS and in reports filed with the SEC – purportedly as part of a scheme to disguise transfers of funds from the BLMIS Investment Advisory (“IA”) business to BLMIS’s Market Making and Proprietary Trading (“MMPT”) operations. As a result of the transfers, MMPT appeared more profitable than would otherwise have been the case. Read more on Forbes [...]