Real Investment Adviser Sold Some Fake Investments
There are a lot of creative and amusing investment frauds in the world, but there is one great simple investment fraud, one original source from which all the others developed:
Tell people that you have a risk-free investment that will give them their money back, with 15 percent interest, any time they want.
Take their money.
Why don't people do this all the time? Well, I mean, they do. It's a pretty popular fraud. But it is usually a fairly small-scale and labor-intensive fraud, because most investors who are at all sophisticated realize that the risk-free 15 percent return is itself a red flag. Real investments are risky or uncertain or at least illiquid; the proper response to a guaranteed liquid 15 percent return is "what's the catch?"
So the charges that the Securities and Exchange Commission andf ederal prosecutors brought today against Andrew Caspersen are surprising in that Caspersen allegedly used exactly that pitch to take $25 million from a single hedge fund, which is a level of size and sophistication where you wouldn't expect people to fall for it. But here's what Caspersen's investor allegedly bought:
