Dynamic Securities Analytics, Inc.

Why don’t ponzi scheme operators ever have a get-away plan?

One of the positive outcomes of all the Ponzi schemes in the news is that most of the operators have been caught. Granted, they haven’t been convicted and are innocent until proven guilty but it’s interesting that after allegedly stealing millions or billions of dollars, these guys didn’t have a decent get-away plan.  Anyone who has watched at least one heist flick knows that every bank robber has a get-away driver. 

Here's a few thoughts as to why they didn't have a get-away plan:

1)  Many of operators had been running their scam for years and were probably lulled into a sense of safety. If they had gotten away with it for five years, why not run it one more, or five more, or ten more years?

2) Some Ponzi schemes don't originally start out as a scam.  Some operators start off with an intent to invest but either suffer a personal financial crisis or the fund starts losing money and the manager does not want to reveal this to investors.  Either way, the fund manager may not have much money left to fund his get-away.

2) Ponzi scheme operators were as surprised as anyone at the swiftness of the market decline which exposed the Ponzi schemes so that they didn’t have time to concoct a good escape. 

Tags: ponzi scheme

2009 Securities Arbitration Filing Trends

FINRA reports that arbitration filings are up 90% through February 2009 over the prior year.  There were 1,065 arbitrations filed in just January and February 2009.  If these numbers hold steady over the rest of the year, 2009 will witness a level of arbitration filings not seen since 2005.  However, I don’t expect the filings to “hold steady” through 2009. I expect them to increase.  As we saw with the Tech Wreck that began in 2001, the highpoint in filings wasn’t reached until 2003.  In fact, 2003 had 30% more filings that 2001.

Also, here is a nice wrap-up of 2008 arbitration filings prepared by the Sutherland law firm. It complements my prior post about 2008 trends.

tags: securities arbitration

2008 Securities Arbitration Filing Trends: Security Type

FINRA added three new securities types: Variable Annuities, Derivative Securities and Auction Rate Securities to the Security Type list in 2008.  Derivative Securities was the second most frequently cited type of security in its first year on the list. Mutual funds moved ahead of Common Stock in 2008 as the most frequently cited security type in arbitrations. In fact, the number of arbitration filings that included Common Stock actually decreased 2% from 2007.  “Annuities” also decreased by 3% but that was likely due to the fact that “Variable Annuities” received its own category. Filings regarding Corporate Bonds increased 130% over 2007.

 

tags: securities arbitration, FINRA filings, variable annuities, derivatives

 

2008 Securities Arbitration Filing Trends: Type of Controversy

FINRA released the final tallies for 2008 arbitration filings.  2008 witnessed marked change in trends regarding the type of controversy.  Filings citing “Omission of Facts” increased 337% from 2007 levels. Misrepresentation saw the second largest jump in filings with an increase of 171% over 2007.  In 2007, Misrepresentation was the 5^th most frequently cited type of controversy and it jumped to second place in 2008.

On the other end of the spectrum, “Failure to Supervise” fell from the 4^th most cited type of controversy in 2007 to 7^th place in 2008. “Breach of Fiduciary Duty” has retained its #1 spot for another year as the most frequently cited type of controversy while “Margin Calls” was ranked 10^th for the fourth year in a row. 

With the large number of Ponzi schemes discovered recently, will FINRA expand its list of controversy type options to include “Fraud”? Or will Ponzi claims be lumped into Negligence, Failure to Supervise and/or Omission of Facts?

Tags: securities arbitration, FINRA arbitration, Ponzi