A Stanford -Olint link ?

There are speculations that there may have been a link between  David Smith’s   Olint and the Allen Stanford group.

In today Herald,  law professor David Rowe, seems to be suggesting that there may indeed be such a link.

He further suggested that Olint investors funds may have also been funneled into the Stanford Group of Companies, without its (Olint) investors knowledge.

Link to the above story

http://www.sunheraldja.com/article/show/2304

Long Week-end for Smith & Olint faithful

January 9, 2008 should have been a defining moment for the Olint faithful and the their leader David Smith. Instead the expected ruling was delayed until today January 12, 2008. What is not clear is how much difference a “postive ruling” by the judge in Turks and Caicos Islands will make.

How will the judge rule?

Although each case has to be taken on its merit, the Madoff case has highlighted the difficulties for investigators and regulators. The judge might be inclined to side with the prosecutors and give them more time. One of the problems is the Madoff case is that despite the fact that the some beleived the Madoff was doing something wrong the evidence was hard to, or just did not come by and just was not sufficient to make a case. Although it should not, the judge is human and Madoff’s case might just weigh heavily on his mind.

David Smith’s Problem

In addition, David Smith on the other had has a problem, Olint the alleged Forex Trading outfit, was NOT paying before his assets were frozen in July 2008. Indeed it was those complaints about lack of payment that partially or more than partially led to the actions of the Financial Crimes Unit in TCI. So the frozen assets did not bring a halt to payments as they had stopped a long time before that. Olint and David Smith are the subject of a Cease and Desist order by the FSC  in Jamaica along with warnings issues by the regulator bodies in St. Kitts and Trinidad and Tobago.

Going back in history in May 2008, The David Smith led Olint had outlined an elaborate payment plan to start paying in June 2008. It was the failure of that plan get going along with the NFA investigation in I-Trade Fx, in which David Smith figured prominently,  along with months of investigation in the TCI that led to the freeze in July 2008.

John Wildish, co-director in TCI FX believes that the TCI FX traders funds are safe according to a November 2009 interview with Wiv4 TV but he might be in for a rude awakening. He was unable to pay investors since June 2008 again before the freeze was in place.

It is for those reasons why the judge might just extend the freeze probably giving the police a deadline to make a case given the grave nature of the case.

Where and how much

If the judge opts to unfreeze the funds, the question is how much is really available? What about the funds in the USA. Even before the freeze David Smith kept saying “The broker has the money”. Does the broker still have the money and won’t release it?

If Olint was a Ponzi from the beginning or became a Ponzi how much money is really there? how many cents on the dollar? When will the receiver be called in?

While we ponder the what ifs, hows and whys, we now awaiting the latest ruling (or delay) by the TCI judge.

One things is sure there is a long list of anxious club owners and members waiting on a ‘postive word’ today.

Related:

• January 9th is here…
• Olint Raided, Assets Frozen
• MTI says – Scams,Schemes, Scandals!
• How OLINT survived?

Sources:

• David Smith in Court(WIV4)

The value of regulation and disclosure – Part II

On June 25, 2008 I wrote the first part in a series on FX FOREX LIQUIDITY LLC.

The company was brought before the courts by the regulatory agency – the CFTC, for falsification or misrepresentation of its financial records. The company was found to be undercapitalized from March 2007, but provided data to show otherwise.

I had indicated that I would have presented the receiver report indicating a tale of deception and ineptitude by the management of the company.

The owner directors of FX FOREX LIQUIDITY LLC were engaged in activities such as falsification of financial records, moving funds between accounts on which no trading took place, stating that clients accounts were making a profit, when in fact they were suffering losses.

Read the Part one of the receiver report here, its a real eye opener and then try to link what you have read here  to the current situation facing the forex trading clubs in Jamaica

www.robbevans.com/pdf/forexlqreport01.pdf

Related

• The value of regulation and disclosure

Investing is for gains not for losses

There is this nonsense going around about “I invest what I can afford to lose”.

Which “good” investor, invests to lose? What really is investment? Let us define this:

Investing: the act of committing, laying out money or capital in an enterprise with the expectation of profit.

Money is invested with an expectation of profit. So one expects to make a profit from his investing activities, not losses.

The very act of investing calls for some of the following.

1. Careful analysis of the business within which one wants to invest.
2. Careful analysis of the sector within which one plans to invest.
3. Pouring over the financial records of the company you plan to invest in (ie stocks).

The idea is to make sure that the downside of investing is low, while the upside is great. Having done all the above does not however guarantee you profits, as unexpected acts could take place, which throws your plans off track. The goal however is to have done the your best to make sure the outcome is in your favour.

Afford to Lose

The latest buzzword for those “investing” in the Alternative Investment Scheme (AIS) of “investing only what you can afford to lose” is nothing more than rhetoric. If Olint or any of the AIS ever post a loss in any month after a string of monthly profits, we would all see these guys scrambling to get out.

At the end of every month these same folk are asking.

1. How much did Olint, Lewfam post this month?
2. When am I going to get my requested funds?

If they are like some investors that could really afford to lose it, then it really does not matter if they are every paid. I am sure that the AIS GUYS who read these blogs, and are not paying, would be thinking, these guys who invest with us can afford to lose their investments, so what is the big deal.

Words of Wisdom

Warren Buffet, one the world richest men of this generation, echos the words of wisdom from his mentor. The two key rules of investing given by Benjamin Graham should be held in high regard. The two rules are:

• Don’t lose money, and
• Don’t forget the first rule.

No real investor, invests with the intention to lose. One should seek to analyze, diversify and practice good risk management in order mitigate losses should they occur. Remember,  “Think and Check before you Invest.”

The value of regulation and disclosure

Some folks have sought to use the failures of a number or prominent companies to downplay the importance of the financial data produced by these companies.

They have even sought to suggest that the information is meaningless and will not help you to determine if the company is failing.

I know I have never sought to suggest that this published data and regulation will not prevent a company failing; instead I have maintained that they can help in identifying potential failure before it actually occurs.

Take a look the information, I have provided below.

Here is a company, which has been registered with both the NFA – National Futures Association as well as the CFTC – Commodities Futures Trading Commission.

FX FOREX LIQUIDITY LLC.

The company was brought before the courts by the regulatory agency – the CFTC, for falsification or misrepresentation of its financial records. The company was found to be undercapitalized from March 2007, but provided data to show otherwise.

What “saved” investors from greater losses were:

• The fact that they were regulated
• They had to produce financial data
• The regulator looked at the financial data and picked up that something was wrong.

See the following links

March financial data :

http://www.cftc.gov/files/tm/fcm/tmfcmdata0703.pdf

Then take a look at April data, and you will notice a big jump in the capitalization of the company( turns out to be a big fat lie).

April financial data:

http://www.cftc.gov/files/tm/fcm/tmfcmdata0704.pdf

CFTC takes action against FX FOREX LIQUIDITY.

Check this link for the complaint

Check this other link for the actual enforcement order(PDF)

Next: The receiver report

In addition a receiver was brought in at a later stage and what he found was a tale of woes at the company, ranging from poorly kept records to down right fraudulent conversion.

Stay tuned

Pulse Rights Issue oversubscribed

Investors seem to be finding real value in Pulse’s stock. Pulse investments is reporting that their latest Rights Issue, which was opened to shareholders on record as of May 5, 2008, has been oversubscribed. The Rights Issue closed on Monday May 26, 2008. On offer were 18 million shares at $7 dollars per share.  According to the report, 20.2 million  shares were bought.

The money raised from the share offer will according to Pulse be used to 

1. Refurbish Villa Ronai
2. Expand their overseas operations
3. Develop new interactive website
4. New traflagar storage facility
5. Peter Tosh Museum project

The share price for Pulse Investments closed at $7.00 and year-to-date the stock price is up a whopping 169.23%.

Source:  Pulse raises $120 mil from share offer

REIT IPO take up slow

The Carlton Savannah’h IPO has so far had a lukewarm response. Up until Wednesday of this week brokers have reported that things have been slow.

The Jamaica Gleaner Reports,

Brokers yesterday said that take-up of the J$1.254 billion initial public offering (IPO) by a Jamaican-based real-estate investment fund has so far been slow, but that offer could still prove a major success by the time it closes on Friday.

“There has been a lot of enquiries, but the uptake has been low,” an analyst at one brokerage house told Wednesday Business.

On the radio and other media, the ads promoting the offer have picked up. It will interesting to see what the how the take-up will turn out.

The offer closes on Friday May 30, 2008 at 4:00 p.m.

Source:

• Carlton Savannah Offer to Pick Up

Micheal Lee-Chin’s Investment pays off

When Micheal Lee-Chin bought NCB I am not sure he dreamt that  in six-years his investment would pay off so quickly.  The Observer presents a very interesting peice worth reading

Yesterday, National Commercial Bank’s (NCB’s) share price closed on the Jamaica Stock Exchange (JSE) four cents lower than the day before. But for Michael Lee Chin, the price of $23.94 a share was more than seven times the price he would have paid per share back in 2002 when he bought a majority stake in the bank.

How much did he purchase NCB for in 2002?

Lee Chin bought a75 per cent stake in NCB back in 2002 for US$127 million (J$6 billion in 2002), of which US$56 million (J$2.65 billion) was made as a downpayment.

How much did he actually pay down to purchase his stake in NCB?

Considering that only J$2.65 billion was paid down, earnings from dividends and share sales would have taken care of the rest of payments that were made in tranches over the years following 2002, reflecting an even higher return on his initial investment.

The discussions will rage whether or not it was a good deal for Jamaica but for Micheal Lee-Chin, the deal has more paid off.

Source: NCB deal eightfold