The Commodity Futures Trading Commission (CFTC) has sued a former Chicago floor broker, claiming he ran a four-year Ponzi scheme and fraudulently solicited at least $7.8 million to trade commodity futures contracts. In a civil lawsuit, the CFTC said Bradley Schiller ran the Ponzi scheme promised investors annual returns of 13 percent or higher. But he never delivered, the suit charged. More in the Chicago Tribune here. [...]
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The Securities and Exchange Commission said it charged a California investment adviser for allegedly running a $60 million Ponzi scheme and defrauding investors. The regulator claimed that John A. Geringer, a Scotts Valley man who managed GLR Growth Fund, used phony marketing materials to lure investors into believing that his fund was earning 17% to 25% annual returns every year it was in business by making investments tied to major stock indices like the S&P 500 and Dow Jones Industrial Average. More in the Wall Street Journal [...] The U.S. Securities and Exchange Commission barred one of its former enforcement officials from practicing before the agency for one year over claims he violated federal conflict-of-interest rules. Spencer Barasch, who participated in the SEC’s investigation of R. Allen Stanford’s $7 billion Ponzi scheme, performed private legal work for Stanford Group Co. about a year after leaving the agency even though the agency’s ethics office had told him he was prohibited from doing so, the SEC said in a statement today. Barasch consented to the bar without admitting or denying the allegations. Read Bloomberg report [...] Bernard Madoff’s investors shouldn’t be allowed to appeal a court ruling denying them payment for fake Ponzi profits on their account statements, the U.S. Securities and Exchange Commission said. The investors asked the U.S. Supreme Court to hear their case after a federal appeals court in New York said in August it would be “absurd” to treat fictitious paper profits as real, upholding a lower court ruling. The Supreme Court justices asked the SEC to file papers by today if they should take the appeal on whether the liquidator of the con man’s brokerage is using the right formula to compensate investors. Leaders of exchange operator CME Group Inc. (CME) said on Wednesday that they acted properly and in accordance with bankruptcy laws following the collapse of brokerage firm MF Global (MFGLQ). “All of the information has yet to come out,” said CME Executive Chairman Terry Duffy, responding to questions at CME’s annual shareholder meeting. MF Global customers are said to be missing some $1.6 billion that couldn’t be accounted for as the brokerage collapsed. See Fox Business News report [...] ONE OF THE most seductive narratives about the recent financial crisis is that it was caused by dizzying increases in the amount of leverage on the balance sheets of Wall Street firms, leaving the financial system virtually no margin for error. Leverage, we’ve been told repeatedly, went from about 12-to-1 in 2004 to 33-to-1 in 2008. (Leverage is the ratio of debt or assets to equity; at 33-to-1 leverage, a mere 3 percent drop in the value of a firm’s assets can wipe out its equity.) The reason for the increase, so the story goes, was an underappreciated change, in April 2004, to an obscure Securities and Exchange Commission rule, which let Wall Street off its short leash and allowed unprecedented risk-taking. If not for that, according to the popular press and many accomplished scholars, the crisis might not have happened. The acceptance of this thesis has colored not only how we think about what happened but also the new laws that were designed to prevent the next crisis. The problem is, it’s flat wrong. And because we have misunderstood the facts, we may now be trying to cure the wrong disease. Read the Atlantic report [...] A North Carolina man convicted of running the $40 million Black Diamond Ponzi scheme was sentenced Wednesday to 50 years in prison for what prosecutors called “the worst financial crime in this district in memory.” Keith Simmons, 47, didn’t react while U.S. Chief District Judge Robert Conrad read the sentence in a quiet courtroom. The Black Diamond scheme had more than 400 victims, prosecutors said, many of them elderly. Nearly 100 were more than 75 years old, and many lost their entire life savings. More in the News Observer [...] Sometime in the next few days of testimony in the prosecution of former Goldman Sachs director Rajat Gupta, U.S. Senior District Judge Jed Rakoff will probably take a moment to give jurors what he has described in previous trials as a “heads-up.” Rakoff will offer the jury a preliminary instruction on what insider trading is. If you think that’s an easy task, you should look at the proposed instructions the government and defense counsel from Kramer Levin Naftalis & Frankel submitted to Rakoff this week. The two sides agree that Rakoff should use phrases like “material non-public information,” but beyond that they’re each trying to use the preliminary instruction to sway jurors. More on Reuters here. The founder of a hedge fund was found on Tuesday to have defrauded his former partners and was ordered to pay them $35 million in a case described by one lawyer as a “mini-Madoff.” James Crombie, a one-time JPMorgan Chase & Co trader, was ordered by a Delaware Court of Chancery judge to compensate Peter McConnon and Timothy Lyons for their contributions to starting Paron Capital Management LLC and for lost future earnings. More on Reuters [...] It is no exaggeration to say that since the 1980s, much of the American (and global) financial sector has become criminalized, creating an industry culture that tolerates or even encourages systematic fraud. The behavior that caused the mortgage bubble and financial crisis was a natural outcome and continuation of this pattern, rather than some kind of economic accident. More in the Huffington Post [...] |
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