Saturday, November 15, 2014

Trust me, I'm an unregulated market

While the big banks were busy cheating their customers by rigging the forex (foreign exchange) markets, somebody was taking them for a billion smackeroos the old-fashioned way.

Bernie Madoff would be proud. And envious. He had to pay Manhattan business lease rents and maintain the semblance of a real business. Much easier to set up a cyber bucket shop and milk the rubes of all their bitcoins and other digital money.
In May and June last year, Mandal and his wife, Wasima, 37, also a physician, invested $30,000 each with Secure, which required customers to use U.S. dollars. The Mandals swapped pounds for $60,000, using a bank. Following instructions from Secure, they then wired the money to banks in Australia and Cyprus to open their accounts.
Logging into the company’s website regularly, they watched as Secure traded the dollar versus the euro. Secure’s website showed that their accounts had soared in value to a total of $245,000 -- a fourfold increase -- in just 10 months.
Mandal says he decided to withdraw some money in March. In an e-mailed response, Secure said he’d have to wait. It cited issues with the U.S. Foreign Account Tax Compliance Act, which is a Treasury Department rule that applies to U.S. citizens using foreign accounts -- a law that was irrelevant to Mandal, who’s a U.K. citizen. The March 5 e-mail said Mandal would get the money in a few days.
Both these stories are from Bloomberg, which I prefer as a source of crime, er, business news because it goes into so much more detail.

Other than that, not much has changed since I first subscribed to The Wall Street Journal in 1971 (after reading my father's copies sometimes when I was a wee tyke). I soon learned that the most interesting part of the Journal was page 4, where the crime stories ran.

While the daily paper in Norfolk, Virginia, where I then worked, would give play to a stickup of a cab driver that netted $60, day after day the WSJ reported on financial crimes that netted tens, often hundreds of millions of dollars.

And the thieves would seldom go to prison for these heists. If they did, it was 24 months in Danbury (the country club masquerading as a federal lockup for business criminals), while the mugger who stuck up the cabbie would do 5 hard in a state hellhole.

Not too long before I became the business editor at the paper, a couple of upstanding local businessmen who ran a shipyard were convicted of bribing their way into Navy contracts. It was a surprise (not that they were crooks, that they were convicted) and the retiring business editor, Artie Henderson, was stunned when a judge sentenced them to a shortish term in the pen.

"Why put men of that class in prison?" Artie wailed. "Because they are thieves," I said.

He didn't say another word but he was not persuaded. He ate lunch with those guys at the Civitan. Moose, Elks, Rotary, Lions etc. and surely prisons were not made for his friends.

(I had a lot of respect for Artie. As a vet back from World War II he had gotten elected to the Portsmouth City Council and fought a lonely -- eventually successful -- campaign to allow veteran housing in the city, something the country clubbers who had run the town didn't want. But by the time I knew him, Artie was tired and sick and beaten down.

(After his Civitan lunches, he would sleep at his desk, mouth open. Once one of the photographers took a picture of his gaping mouth and taped a print of it on the ceiling over Artie's head. Artie was humiliated. None of the young guys in the newsroom, except me, knew about Artie's brave career. And none of them ever did half what Artie did for his town.)


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