First Madoff, then Stanford. The list of money managers accused of defrauding investors is growing: add honchos from WG Trading and Westgate Capital to the list. Again, one of my favorite Warren Buffett quotes seems pertinent: "Only when the tide goes out do you learn who's been swimming naked."
Bloomberg is reporting that two money managers from WG Trading Co. (based in Connecticut) were arrested for an alleged $550 million fraud scheme involving institutional investors and universities, and two other money managers were arrested this week for two separate securities fraud cases. One of those is the head of Westgate Capital Management, and the other was an associate of the WG Trading managers.
FINRA, the Financial Industry Regulatory Authority, thinks it time to roll out an investor alert: Avoiding Investing Scams contains something for everyone. Pick your scheme: Ponzi, pyramid, pump-and-dump, advanced fee fraud, and offshore scams. The paper also explains the psychology of scams and how fraudsters tailor their pitch to match the psychological profiles of their target (they do this by asking about your health, political views, family, and previous employers.)
The FINRA alert also describes the specific tactics scammers use, such as the "reciprocity tactic," in which they offer you a break in return for a big favor. For example, "I'll give you a break on commission if you buy now."