Federal prosecutors in California are investigating whether a Goldman Sachs executive leaked confidential information about two publicly traded companies to Raj Rajaratnam, the convicted hedge fund manager. The previously undisclosed criminal inquiry emerged during a pretrial hearing on Thursday in the case of Rajat K. Gupta, the former Goldman director. Mr. Gupta is accused of telling Mr. Rajaratnam about secret boardroom discussions at Goldman and Procter & Gamble, where he also served on the board. More in the New York Times [...]
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The SEC has also settled lawsuits against J.P. Morgan Securities (JPM), Wachovia Capital Markets, and Goldman Sachs for misleading investors in securitized debt packages, such as collateralized debt obligations, during the financial crisis. It has created a special asset management unit to pursue hedge funds. This is refreshing for an agency that failed to detect hedge fund manager Bernie Madoff’s $65 billion Ponzi scheme despite repeated warnings from money manager Harry Markopolos. In a U.S. Senate hearing after Madoff’s December 2008 arrest, Markopolos said, “The typical SEC staff attorney would have trouble finding ice cream in a Dairy Queen.” More on Bloomberg Businessweek [...] Sometimes it’s much easier to swindle people you know than it is to cold call for future victims.The experts call this affinity fraud. Yet it never seems to go out of style because by our very nature most of us are trusting. All too often, operators victimize a religious community. It’s a built-in network of people who share the same faith and often the same community, so it can be a real breeding ground for con artists. No faith is immune from scamsters. Read Forbes article [...] FThe trustee liquidating MF Global’s broker-dealer said on Wednesday a dispute with the broker’s UK affiliate over the rights to about $700 million will have to be settled by an English court. James Giddens, who is in charge of recovering as much money as possible for customers burned by MF Global’s October collapse, had asserted that money currently at the firm’s UK affiliate belongs to U.S. customers who traded on foreign exchanges. The UK affiliate has said the money belongs to its own customers. More on Reuters [...] On April 18, 2012, a criminal Complaint filed in federal court in Brooklyn, NY, alleged that from December 2008 and April 2012, three defendants had participated in a $15 million investment fraud: HSBC Holdings Plc (HSBA), UniCredit SpA (UCG), Merrill Lynch and hundreds of other defendants in lawsuits filed by the liquidator of Bernard Madoff’s defunct firm are finding that their best ally may be U.S. District Judge Jed S. Rakoff. Rakoff, who along with another federal judge has already dismissed about $90 billion of the $100 billion in claims made by the liquidator, Irving Picard, has invited Picard’s targets to ask that their cases be moved from bankruptcy court to his district court. Rakoff said district courts are the proper venue for some of Picard’s claims because they involve issues outside of bankruptcy law. Picard has said that defendants who want to switch are engaging in “forum shopping.” More on Bloomberg Businessweek [...] Two new co-sponsors have signed onto H.R. 757 – Rep. Scott Tipton [R-CO3] and Rep. Blaine Luetkemeyer [R-MO9]. A Florida fraudster dubbed the “mini Madoff” has died in prison. Arthur Nadel died at the Federal Correction Complex in Butner, N.C., on Monday, the Federal Bureau of Prisons confirmed Tuesday. The bureau did not immediately provide information about Nadel’s cause of death. Nadel, 80, was accused in 2009 of orchestrating a Ponzi scheme that bilked customers out of more than $150 million. He was convicted in 2010 and sentenced to 14 years in federal prison. Read New York Post report [...] The U.S. Securities and Exchange Commission is asking banks that issue structured notes to boost disclosures to investors, including the banks’ own estimates for the securities’ market value at the time of sale. The regulator sought the changes in a letter to banks it didn’t identify that was posted on its website April 13. The agency also asked the issuers to explain how they set up a secondary market for the notes, how they use the proceeds raised from sales and how important the business is to their funding needs. Read Bloomberg report [...] Financial fraud seems to have proliferated in recent years as volatility has increased and as markets go down. In fact, when the market drops and assets levels fall, clients seek to redeem their investments and those redemption notices put schemers on the ropes because they have to come up with the money to return. That’s how Madoff was caught. It wasn’t from a whistle-blower, but it should have been. More in the Huffington Post [...] |
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