A Tutorial On Managed Buy/Sell Private Placement Programs: Chapter 10

A Tutorial On Managed Buy/Sell Private Placement Programs: Chapter 10
By Michael Weiner

SCAMS

From time to time you may hear about scams (or potential scams) in the High Yield Investment Programs arena. One of the conditions that facilitate scams in this business is due mainly to the non-solicitation environment and the private approach required that forces information to remain as pure whispered gossip ready to be expressed aloud at any time. That fact facilitates a diffuse level of ignorance in this matter where scammers are in their element.

Possible scams include:

– The intermediary asks for up-front fees (in a real situation no one will ask for up-front fees to the client).

– You are asked to transfer the money into an escrow account not in full control of the client.

– You are asked to buy a bank instrument against the funds to start the program (that later will be discovered to be of no value).

– You are asked to pool the funds together with other little clients.

The internet is now full of different money-making opportunities that promise to return a high yield on the small client’s money. In most cases such programs are Ponzi schemes (pyramid schemes). And even if a few might be managed by honest people who are trying to aggregate enough funds in order to enter this kind of trading, they are doomed to fail. First there is the problem with pooling a €100M minimum. In many countries, it is illegal to pool money with promises of a high return. Factor in the problems with high numbers of participants being managed, the trust factor, and clearance issues, trading may never begin…

However, the main scams are usually made or attempted with small clients that never will qualify as PPOP clients. Usually, it is very rare that an honest client with €100M can fall into this kind of trap. Larger clients are investment savvy and can utilize the knowledge of other financial experts to drive the deal on a “safety road”.

WARNING ON SCAMS

It is very common to find so-called “Official Reports” warning the public that this business does not exist and any of these offers are scams.

The reports in question could have been written by the SEC, FBI, ICC or any other regulatory authority. You should be aware that official documents like the “Commercial Crime Services’ Special Report on Prime Bank Instruments Frauds” by the ICC Commercial Crime Bureau are widely spread and used as a reference by banks, accountant firms, lawyers, SEC, FBI, and other authorities around the world. So, if the ICC says that this is a scam, and your accountant says that this is a scam, and your banker says that this is a scam, is it a scam?

Understand, most people working at banks, securities houses, and accountant firms have no insight into this kind of trading. So, if the SEC, FBI, and others say that this is a scam, then they believe it to be so. Unless it isn’t.

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