A Close Call!

Yesterday's business section of the newspaper had a headline that broke a story about a fraudulent investment scam allegedly perpetrated on the Big Island, in Hilo.

Basically, it was another Ponzi scheme, dealing with fraudulent securities trading. The perpetrators, two gentlemen, were living large, driving leased Jaguars and BMW's. One of them, who I will just call 'James', even rented a $25,000 a month Big Island beachfront home, presenting it as his own, and using it to hold presentations to would be investors. 

What I want to mention, is that I was reading this article with great interest, because in the recesses of my mind, I remember a close call I had with a gentleman who had recently located in Hilo, on the Big Island. The situation was, about a 18 months ago I met this fellow at a real estate investment 'seminar', which I attended more for the purpose of making contacts than for gaining any investment knowledge. This gentleman impressed me with his stories of investment coups that he had engineered, dazzled me with stories of his contacts on the Big Island, and how he was hoping to team up with a knowledgable real estate professional such as myself, to continue building his empire in Hilo.

Within a couple of weeks, we were discussing plans for a new venture, and busied ourselves with getting our corporate documents filed, drawing up our bylaws, issuing stock and all that good stuff. Then one day, out of the blue, I get a phone call from some unknown person, who askes me if I know Mr. 'X' (James). This mystery caller gave me his name, and identified himself as someone whom 'James' had swindled out of more than $250,000.00 in a real estate deal.

He went on to tell me more horror stories, about how 'James' had emptied a young womans trust fund, and liked to drive brand new Jaguars, along with numerous sordid details. He asked me to meet him downtown, where he handed over to me a two inch thick file from the State Attorney Generals office, documenting complaints, filed by residents that 'James' had run a "Foreclosure Rescue" scheme on. There were at least 5 people who had lost their homes, and untold sums of money, because they had trusted 'James' to save them from financial ruin. There was testimony from one young man who had worked with 'James', and been duped into committing fraud on his friends and neighbors.

Needless to say, thanks to this good samaritan's warning, I bailed out of this venture before any harm was done. I was even contacted by the state prosecutors office, which was very interested in learning of 'James' whereabouts. What happened after, I have no clue.

I only had to read less than three column inches before 'James' name popped off of the newspaper.

The U.S. Commodity Futures Trading Commission (CFTC), in addition to action taken by the state Commisioner of Securities, described their complaints against 'James' as portraying his corporation as having a proprietary software that "never lost money" and "automated the trading of commodities".

The state has issued "cease and desist" orders aginst the firm, along with 'James' and the corporations officers. The case alledges that the firm was selling unregistered securities to investors in several states, promising 20% monthly returns using the automated trading system. The firm also issued false account statements, and lied to investors about the firms success.

The newspaper went on to explain that "the firm started up last year in Hilo, first looked at the real estate business before deciding in investing in off-exchange foreign currency contracts, though none of the principals had extensive experience in the business."

Three of the firms workers, who were not participating in the fraud, became  suspicious about the firms promises, and in February reported their suspicions to state regulators.

By the way, 'James' was contacted by the newspaper, and declared "We're not criminals", and declined further statements until he can retain an attorney.

How's that for a close call?