Another dodgy hedge fund. Echoes of Bernie Madoff.

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fredflinstone
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Another dodgy hedge fund. Echoes of Bernie Madoff.

Post by fredflinstone » Mon Jul 25, 2016 6:24 am

Via the WSJ:
Platinum has recorded some of the most impressive numbers in the hedge-fund world, double-digit average annual returns for over a decade.

Beginning around 2012, however, with some investors wanting their money back, Platinum began borrowing heavily. According to documents reviewed by The Wall Street Journal and people familiar with the firm, Platinum borrowed hundreds of millions of dollars, some of it at double-digit interest rates.
The hedge fund is no longer honoring redemption requests. It says it hopes to repay its investors in 2017.

Full text for WSJ subscribers at: http://www.wsj.com/articles/fraud-inves ... 1469439181

Here is a chart in the article showing one of the hedge fund's "returns":

Image

I hope investors are able to get some of their money back.

Tamalak
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Re: Another dodgy hedge fund. Echoes of Bernie Madoff.

Post by Tamalak » Mon Jul 25, 2016 8:06 am

I don't give a damn if they do.. if you chuck your money in a black box with smoke spewing out of it you clearly don't care that much about it :twisted:

david99
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Re: Another dodgy hedge fund. Echoes of Bernie Madoff.

Post by david99 » Mon Jul 25, 2016 8:25 am

Another good reason to invest in boring index funds. We don't need the kind of nail biting excitement that Madoff gave to all of his investors.

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fredflinstone
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Re: Another dodgy hedge fund. Echoes of Bernie Madoff.

Post by fredflinstone » Mon Jul 25, 2016 9:18 am

Tamalak wrote:I don't give a damn if they do.. if you chuck your money in a black box with smoke spewing out of it you clearly don't care that much about it :twisted:
So, blame the victim?

Tamalak
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Re: Another dodgy hedge fund. Echoes of Bernie Madoff.

Post by Tamalak » Mon Jul 25, 2016 9:24 am

fredflinstone wrote:
Tamalak wrote:I don't give a damn if they do.. if you chuck your money in a black box with smoke spewing out of it you clearly don't care that much about it :twisted:
So, blame the victim?
Yes. Blame the victim, jail the perpetrators!

ikowik
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Re: Another dodgy hedge fund. Echoes of Bernie Madoff.

Post by ikowik » Mon Jul 25, 2016 10:59 am

This is an "interesting" company.

From a Bloomberg story in 2015
(Link: http://www.bloomberg.com/news/articles/ ... rs-returns)

"The investment connected with terminally ill patients shows the lengths Platinum will go to find a can’t-miss bet. Insurance companies were offering variable annuities -- a type of guaranteed investment contract -- with bonuses that only applied when the investor died. A broker approached Platinum in 2007 with an idea, according to the U.S. Securities and Exchange Commission: Find people who were near death and buy contracts with their names using the fund’s money. With the bonuses, the fund could earn 5 percent, risk-free, as soon as each person died.
Platinum set up a company called BDL Group to invest in the annuities, eventually putting up more than $56 million, and Nordlicht brought in a friend to oversee the process, the SEC said in an administrative order. A rabbi in Los Angeles found the hospice patients and tricked them into providing their personal information so that BDL could take out annuities with their names, according to the SEC.
Nordlicht’s friend, the rabbi and BDL agreed last year to pay about $4 million in settlements with the SEC, without admitting doing anything wrong. Neither Platinum nor Nordlicht were accused of wrongdoing".

jpelder
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Re: Another dodgy hedge fund. Echoes of Bernie Madoff.

Post by jpelder » Mon Jul 25, 2016 11:09 am

You say "Dodgy Hedge Fund" like there's a non-dodgy type of hedge fund...

TonyDAntonio
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Re: Another dodgy hedge fund. Echoes of Bernie Madoff.

Post by TonyDAntonio » Mon Jul 25, 2016 11:43 am

There was no "nail biting" with Madoff. His investors "made" 1% per month, every month, until they didn't. It's probably where Dave Ramsey got his "stocks return 12% per year" stat. This is how I know I'm not in a scam-fund...I lose money all the time.
david99 wrote:Another good reason to invest in boring index funds. We don't need the kind of nail biting excitement that Madoff gave to all of his investors.

edge
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Re: Another dodgy hedge fund. Echoes of Bernie Madoff.

Post by edge » Mon Jul 25, 2016 12:12 pm

This is not that uncommon. Life insurance companies have been fighting this for ages. Another version of it is the hedge fund takes over the premiums for a life insurance contract and pays a less than face value sum to the original policy holder in return for getting the final payout.
ikowik wrote:This is an "interesting" company.

From a Bloomberg story in 2015
(Link: http://www.bloomberg.com/news/articles/ ... rs-returns)

"The investment connected with terminally ill patients shows the lengths Platinum will go to find a can’t-miss bet. Insurance companies were offering variable annuities -- a type of guaranteed investment contract -- with bonuses that only applied when the investor died. A broker approached Platinum in 2007 with an idea, according to the U.S. Securities and Exchange Commission: Find people who were near death and buy contracts with their names using the fund’s money. With the bonuses, the fund could earn 5 percent, risk-free, as soon as each person died.
Platinum set up a company called BDL Group to invest in the annuities, eventually putting up more than $56 million, and Nordlicht brought in a friend to oversee the process, the SEC said in an administrative order. A rabbi in Los Angeles found the hospice patients and tricked them into providing their personal information so that BDL could take out annuities with their names, according to the SEC.
Nordlicht’s friend, the rabbi and BDL agreed last year to pay about $4 million in settlements with the SEC, without admitting doing anything wrong. Neither Platinum nor Nordlicht were accused of wrongdoing".

afan
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Re: Another dodgy hedge fund. Echoes of Bernie Madoff.

Post by afan » Thu Jul 28, 2016 8:26 am

Anyone know whether there were investment advisors who steered clients into these hedge funds?

That is usually a part of the story, with kickbacks and planners taking a percent of assets in the hedge fund. This was most reported with Fairfield Greenwich and Ezra Merkin. They did pay out some money to fleeced investors but I don't think any of them were even prosecuted, let alone saw jail time.

I think that they even got to keep most of the fees "earned" based on the fictitious account values invented by Madoff.

Now that is a great business- you collect fees as long as the scam is going and you refund nothing when it blows up.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

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prudent
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Re: Another dodgy hedge fund. Echoes of Bernie Madoff.

Post by prudent » Mon Dec 19, 2016 9:01 pm

Today's WSJ reports the arrest of six executives of Platinum Partners, related to an alleged $1 billion fraud.

Echoes of Madoff, indeed.

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