“Hamilton” Tickets – Part of an Alleged Ponzi Scheme
In my Retirement Planning courses, there is a section in which we discuss priorities for the money. One of those priorities is “Preservation”. It’s usually taken to mean a method for preserving the asset over one’s lifetime, or 2 lifetimes, as the case may be. However, my biggest concern for people is HANGING ON to the asset itself. There are so many cases where investors have been defrauded or received bad/poor advice.
Today’s examples just came in yesterday in Financial Advisor magazine:
Two New York City investment managers have been charged with defrauding investors who thought they were investing in businesses that resold tickets to popular entertainment events like the award-winning Broadway show “Hamilton,” as well as popular concerts by singers such as Adele, the Securities and Exchange Commission announced Monday.
Joseph Meli and Matthew Harriton of New York City are charged with fraud for operating a Ponzi scheme that raised more than $81 million from at least 125 investors in 13 states, the SEC says.
The SEC alleges that Meli and Harriton misrepresented to investors that all of their money would be pooled to buy large blocks of tickets that would be resold at a profit to produce high returns for investors.
However, the bulk of the money was used to pay earlier investors and at least $2 million of it was used for such personal expenses as jewelry purchases, private school and camp tuition, and casino payments.
According to the SEC’s complaint, the scheme went so far as to misrepresent that an agreement was in place with the producer of Hamilton to purchase 35,000 tickets to the musical, but no such agreement existed.
“As alleged in our complaint, Meli and Harriton raised millions from investors by promising big profits from reselling tickets to A-list events when in reality they were moving investor money in a circle and creating a mirage of profitability,” said Paul G. Levenson, director of the SEC’s Boston regional office.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York filed criminal fraud charges against Meli for the ticket scheme.
And yet another horror story:
A Chicago hedge fund manager was sentenced to more than four years in prison after pleading guilty to a $1.8 million fraud scheme that targeted military veterans.
Clayton Cohn, 30, himself a former U.S. Marine, received a 52-month sentence in U.S. District Court, Northern District of Illinois, Eastern Division in Chicago earlier this month, and was ordered to pay $1.55 million in restitution to the victims of his fraudulent activities after he admitted to wire fraud.
Cohn allegedly masqueraded as a successful hedge fund manager to entice 37 clients to invest more than $1.8 million with his firm, Marketaction Capital Management, from 2010 to 2013.
Cohn lost more than $1.5 million of those investments, according to federal prosecutors, spending at least $400,000 the funds on a Los Angeles mansion, high-end nightclub tabs and early stakes in various start-up enterprises.
According to a corresponding civil complaint brought by the Securities and Exchange Commission, Cohn solicited investors through his Veterans Financial Education Network, a non-profit purporting to help veterans manage their money. Cohn allegedly told his clients that it would be easy for them to redeem their investments, but did not disclose that he planned to divert some of their money for personal use.
Cohn allegedly used his lavish lifestyle to contrive the image of a successful trader and investor, when in reality he lost almost all of the money invested through his fund, hiding his losses with fake account statements showing annual returns exceeding 200 percent for 2012.
Last year, the SEC stayed its civil action after federal prosecutors unveiled Cohn’s indictments. But after Cohn’s sentencing, the SEC’s fraud charges will proceed in the same venue.
You can understand why, then…when someone comes to me and says: “I found this really great deal to invest in…”, I have to put on my filtered glasses, get out my b.s. flag (in case I have to raise it), and get ready to push the panic button (My dad always put on on the dashboard of our family Volkswagen bus. If you’ve ever ridden in one, you know why.)
It’s important to understand what the protection mechanisms are for your investments. Custodians, fund managers, portfolio managers, ticker symbols – no one is actually touching your money. Discretionary authority is a separate matter, which you must agree to for a specific reason. Always verify that the securities or entity is licensed, and never write a check to a person. If you are suspicious, contact FINRA or the SEC.