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Wall Street

How Bernie Madoff Is Still Calling the Shots on Wall Street

Back in 1998, my firm visited with a prominent money manager in New York City.

At the time, we were trying to raise money to invest in less‐than‐investment‐grade corporate debt. We attended the meeting and, to put it politely, we were given the brush off. That was no big deal – it happened all the time.

But what that money manager said struck us as very odd…

"Why should I give you guys money?" he asked. "You can't make me one point a month like my friend can."

We responded, "It's not a 'point‐a‐month' world." And that was that.

Several years later, in 2005, we were sitting in front of another group that said it was interested in raising money for us.

The talks proceeded to the point where we were invited to meet with the company's founder and his top lieutenants.

These gentlemen explained they were looking for another product to add to the offering of their "winningest" manager, who was producing "consistent monthly returns in the 80 to 100 basis-point range."

That they were looking for a new product wasn't unusual. But the manager's purported returns sure as hell were. Stranger still, they wouldn't name the manager. The guy's identity was treated like a national security secret.

What's more, these gentlemen stressed repeatedly that they could not consider a strategy that might potentially expose them to losses of as much as 2% a month. Of course, we told them it would be impossible to guarantee that there would never be monthly losses.

Needless to say, the talks went nowhere.

In 2008, barely three years after that bizarre, fruitless meeting, the "winningest" manager with the top-secret name was in handcuffs, perp-walked across every television and front page in the Western world.

We'd had a brush, of the faintest kind, with Bernie Madoff.

Because of simple common sense – the certain knowledge that it's not "a point-a-month world," and a grasp of the fact that any investment can lose money – neither we nor our clients were ever in danger from the con man's massive fraud.

But the same can't be said of Madoff's 4,800 victims, of course, who lost close to $65 billion. On top of the financial ruin, at least two people killed themselves as a result of the Ponzi scheme, including Madoff's own son.

Now here's the really horrible thing: You might think the book is closed on Bernie Madoff. But the story didn't end when they slammed the cell door shut on him at the Federal hoosegow at FCC Butner.

Federal Prisoner No. 61727-054, and every single money manager unwittingly "infected" by him, are still costing unsuspecting investors millions of dollars.

Election

Is This Hillary Clinton Voter Fraud?

Voter fraud in the Democratic primaries is looking more and more likely, as a series of anomalies have almost invariably favored Hillary Clinton.

The trouble started with accusations in the Iowa caucuses. Since then, discrepancies in exit polls, inconsistent vote counts, and voters turned away at polls have tainted more than a dozen primary results.

And it's not just supporters of Sen. Bernie Sanders that have voiced concerns.

Your Money

How Social Media Stock Scams Could Put Your Money at Risk

Social media stock scams – the use of tools like Twitter to spread misinformation to manipulate equities – is one more thing for retail investors to worry about.

A series of incidents over the past several months have put social media stock scams on the radar screens of the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and the Federal Bureau of Investigation (FBI).

While securities fraud is an old problem, stock scams conducted via social media are more capable of causing maximum damage because of the rapid speed at which information spreads over social networks.

"Fraudsters are quick to adapt to new technologies to exploit them for unlawful purposes," Robert B. Kaplan, co-chief of the SEC Enforcement Division's Asset Management Unit, told the Financial Times. "Social media is no exception."

And you don't have to act on the misinformation yourself (such as acting on a false stock tip to buy a penny stock in a "pump-and-dump" scheme) to get hurt by the bad guys.

Like any type of securities fraud, social media stock scams can influence the decisions of investors to buy or sell.

But of greater concern is the increasing weight that social media traffic has on automated trading. Many private equity firms and hedge funds now incorporate data from social media streams because news often breaks there first.

"What we're starting to see now is people looking at Twitter to see key information," Charlie Irish, a technology consultant in London who advises financial clients on how to use new trading platforms, told the Huffington Post. "Quite often, you'll see data released on Twitter a few minutes before it hits the mainstream financial press."

'Facebook Rule' Would Delay IPOs, Open Door to Secondary Market Excesses

You may not yet have heard of the "Facebook Rule," but it's cause for concern.

Its formal name is the Private Company Flexibility and Growth Act (HR 2167), and it was introduced to the House of Representatives on Tuesday by Rep. David Schweikert, R-AZ.

Officially, the bill aims to increase from 500 to 1,000 the number of investors a company can have before it is required to publish its financial information. But in reality, it would simply delay companies from going public – thereby encouraging trading in secondary markets that are rife with questionable practices and shutting out the average investor.

Anatomy of a Scam: This "Prime Bank Program" Has Already Cost Investors Billions

Two years ago, an associate of mine lost $100,000 because he didn't listen to me. A year ago, I saved a manufacturing company from the same scam. And just last week I saved a friend of mine $300,000. For several years now, a far-fetched but seemingly plausible investment opportunity has been wreaking havoc across the […]