When the SEC announced its fraud complaint against Goldman Sachs, people noted that the penalties involved would involve money, not jail time. But an attorney writing for seekingalpha.com argued over the weekend that John Paulson, the hedge fund manager who worked with GS to create “synthetic derivatives,” accessed FICO scores to create his financial product and therefore violated the Fair Credit Reporting Act (FCRA)–which could mean a penalty as high as $1 billion, and even jail time if the FTC or Justice Department decides to go after him. [More]
It’s not exactly Bernie Madoff’s $65 billion, but the Securities And Exchange Commission has charged a Florida businessman with operating a $900 million Ponzi scheme, telling people they were investing — risk-free and at interest rates upward of 26% — in his grocery business, when in fact he was just using the money to fund his lavish lifestyle. [More]
“Waterfall” provisions of asset backed securities are the rules that explain the flow of funds in the transaction, and they are are very hard to read. Blogger/professor Jayanth Varma calls them “horrendously complicated,” leading trustees to make mistakes or pull stunts that investors never expected. To remedy this, the SEC is proposing that the provisions be written in a programming language, filed on EDGAR, and made available as downloadable Python source code. [More]
The SEC today announced civil fraud charges against Goldman Sachs and VP Fabrice Tourre. The chargea allege that Goldman ripped off investors by allowing a client who bet against the housing market to pick the mortgage securities being sold to other investors who were also investing in the housing market. [More]
On his personal website, “natural psychic and Remote Viewer” Sean David Morton claims to have predicted everything from the 1989 San Francisco earthquake to Bill Clinton’s impeachment to the burst of the dotcom bubble. But that doesn’t impress the SEC, who filed a lawsuit against Morton yesterday, alleging that he committed $6 million worth of securities fraud by claiming he could see into the future. [More]
A U.S. District Court Judge signed off on the $150 million settlement between Bank of America Corp. and the Securities and Exchange Commission over allegations of making misleading statements during BofA’s purchase of Merrill Lynch & Co., but he wasn’t exactly happy about doing it. [More]
The SEC’s inspector general has released a jailhouse interview in which his royal Ponziness, Bernie Madoff himself, explains that he got away with his scheme because the SEC basically sucks.
New York Attorney General Andrew Cuomo’s office is gathering information in order to file fraud charges against some BoA executives over what they knew, and what they hid, when they acquired Merrill Lynch & Co. a year ago. Earlier this week, his office subpoenaed 5 board members to find out “what they knew regarding the mounting losses and bonus payments at Merrill before the deal closed on Jan. 1 and what role they played in deciding whether to disclose that information to shareholders,” according to the Associated Press.
Today, as expected, is a crappy day for former Countrywide CEO and co-founder Angelo “Orangey Orangerton” Mozilo. The SEC is suing Mr. Mozilo along with several of his colleagues, claiming that they profited from stock sales while hiding information from investors.
After the bang-up job the Security and Exchange Commission did to prevent Wall Street shenanigans from plunging the economy into the abyss, the White House is looking to form a new commission to step in and do the SEC’s job.
The SEC is pawing through the records of the collapsed investment firm Sentinel Management Group and getting lap dance remains all over their hands. Bloomberg reports it looks like SMG’s lead trader Charles Mosley sold their clients what now amount to worthless securities (“wallpaper,” says the guy in charge of unwinding the company), and the brokers he bought them from showered him with tickets to sporting events, limousine rides, and even underwrote his lap dances. Musta been fun while it lasted.
Oh look, another Mini-Madoff! Meet Alan Fishman, 49, a livery cab driver from Brooklyn, NY who convinced people he was a hedge fund mastermind.
The Ponz is everywhere! Seriously, was anyone doing any real investing over the past several years? John M. Donnelly of Charlottesville, Virginia, was arrested earlier this week and “indicted for fraudulently taking at least $11 million from as many as 31 investors in an alleged Ponzi scheme,” says their local paper the Hook. He was promising investors returns of up to 22% annually, but naturally had failed to make any investments with his clients’ money since 2002. One anonymous person—who may or may not have been a client, we don’t know—told the paper, “I visited his office once. He had a bunch of computers. It seemed like a very sophisticated operation.”
The SEC has busted another Ponzi scheme and ordered its operators to “disgorge their ill-gotten gains.” In this one, Anthony Vassallo of “Equity Investment Management and Trading” recruited investors through his church by saying he had a computer program that would guarantee a 3.5% return on stocks. Eventually he stopped trading and paid off investors using other investor’s money, while shoveling the rest of the funds into other schemes and scams. Vassallo was eventually busted when his investors ganged up on him and said his reports were phony-baloney.
Well, it’s official. Bernie Madoff has plead guilty to 11 counts of fraud, money laundering, perjury and theft. The maximum amount of prison time for these crimes is 150 years.