Sunday, December 11, 2005

$100 Million Dollar Fraud Stopped Dead in it's Tracks

Lately, the news in the fraud arena hasn't been very positive. This next story is "Chicken Soup for the Soul." Here is a breaking story by Judy Nichols of the Arizona Republic involving PBI (Prime Bank Instrument Fraud) and a tip that led to stopping $100 million in fraud.

According to the article, this scam "involves attracting investors to a fund that would tap into a supposedly secret market for the world's prime banks, a market in which billions are said to trade daily for huge, guaranteed profits. In one subset of PBI fraud, designed to also put financial institutions at risk, the scammers quickly move the money from one financial institution to another, from bank to brokerage house, in this country and overseas, all the while telling weird stories about its origin and leaving fishy documents in their wake."

Cameron Holmes, head of the financial remedies section at the Arizona Attorney General's Office received a tip involving $100 million being moved around the world, allegedly backed by a gold mine worth $152 billion.

The total amount of gold mined in Arizona since statehood represents less than $8 billion.

Holmes moved quickly and issued subpoenas to several financial institutions and after interviewing employees was able to track the money and freeze it.

The victims in this can be both the investors, who fall for this scam, as well as the financial institutions, who can be held liable for it when they are charged with not exercising "reasonable care" or due diligence on all the transactions associated with it.

This is certainly an interesting case and Cameron Holmes and the Arizona Attorney General's office should be commended for acting so quickly and effectively. All too often (in more sophisticated scams) by the time they are reacted to, the money is long gone and the victims are left holding the proverbial bag.

For the full story in the Arizona Republic, go to: Fast work in Arizona halts fraud, freezes $100. million.

Here are some tips, I found in a DOJ document on PBI Fraud, January 6, 2000 Mr. Joshua R. Hochberg United States Department of Justice Chief, Fraud Section P.O. Box 28188 :

Don't expect to get rich quick.

Don't assume that your on-line computer service polices its investment bulletin

Don't buy thinly-traded, little known stocks strictly on the basis of on-line hype.

Don't act on the advice of a person who hides his or her identity.

Don't get suckered by claims about "inside information" including pending news releases, contract announcements and products.

Don't assume that just because someone says that they have checked something
out that they have actually done so.

Call your state or provincial securities agency when you suspect a scam.

As with most fraud of a financial nature, much of this is easily spread through the internet. Like all the various scams this one starts with the premise of "something that is too good to be true." The best remedy in these scams is awareness is to "let the buyer beware."

1 comment:

prying1 said...

Good info and sage advice.

Often I get emails concerning all sorts of things from the Tomb of the Unknown Soldier to the Washington Monument. So many subjects and the emails seem plausable. I take the subject to and find that a lot of the info is bunk. If simple emails can make people believe a lie to the point that they send it on to a friend how much more cynical should we be when money is at stake?