Faces of Ponzi’s Descendants

To many, Bernie Madoff was an affable and charismatic man. This is often the case for many hedge fund fraudsters. How not be fooled by their appearance? Our answer is: Trust, but Verify.

Charles PonziCharles Ponzi (March 3, 1882 – January 18, 1949) was an Italian businessman and con artist in the U.S. and Canada. Ponzi promised clients a 50% profit within 45 days, or 100% profit within 90 days, by buying discounted postal reply coupons in other countries and redeeming them at face value in the United States as a form of arbitrage. In reality, Ponzi was paying early investors using the investments of later investors.

 

Hedge Fund Descendants

Bernie MadoffBernie Madoff (April 29, 1938 –) is an American former stockbroker, investment advisor, financier, and white collar criminal. He is the former non-executive Chairman of the NASDAQ stock market, and the admitted operator of a Ponzi scheme that is considered to be the largest financial fraud in U.S. history.
Allen StanfordAllen Stanford (March 24, 1950 –) is a former prominent financier and sponsor of professional sports who is serving a 110-year prison sentence, having been convicted of charges that his investment company was a massive Ponzi scheme and fraud. Stanford was the chairman of the now defunct Stanford Financial Group of Companies.
Tom PettersTom Petters (July 11, 1957 – ) is an American businessman and executive of Petters Group Worldwide. Petters was raised with six siblings in St. Cloud, Minnesota. He worked at the tailor, fur and fabric shop founded by his great-grandfather and operated by his family for over 100 years. In 1988, Petters moved back to Minnesota and founded Amicus Trading, a wholesale brokerage; the name was later changed to The Petters Company. Between 1998 and 2008 Petters created a series of investment funds through which he raised nearly $4 billion through a variety Ponzi schemes. (See: Petters Case Study)
Kazuhiko AsakawaKazuhiko Asakawa (May 9, 1952 – ) is a Japanese financier and a founder of AIJ. Asakawa was known as a legendary stock salesman at Nomura, UBS and Ichiyoshi. Asakawa bought AIJ in 1989 through which he advised struggling medium-size pension funds  due to the lack of financial expertise. Attracting its unrealistically good track record, AIJ eventually raised over $2 billion from 124 investors and ran a Ponzi scheme for almost 10 years. (see: AIJ Case Study)
Florian Homm (2)Florian Homm (Oct 7, 1959 – ) is a German portfolio manager who co-founded publicly traded hedge fund management company, Absolute Capital Management Holdings. Homm was born with a silver spoon in mouth, became a top college basket ball player, graduated from Harvard MBA and became a star portfolio manager at Fidelity. Homm successfully listed Absolute Capital on the AIM of the London Stock Exchange before he suddenly abandoned his $3.5 billion empire and fled.
Edwin FujinagaEdwin Fujinaga (unknown) is a Japanese-American businessman who founded Las Vegas-based MRI International. Fujinaga’s background prior to MRI is unknown. Fujinaga raised over $1.3 billion from Japanese retail investors as MRI promised to pay 6-10% fixed returns through a scheme known as a medical account receivable system. MRI invited their large customers to luxurious trips in Las Vegas. (See: MRI International Case Study)
Steven WalshSteven Walsh (1944 – ) is an American financier who co-founded WG Trading Company with Paul Greenwood. Walsh and Greenwood ran their Ponzi scheme for over 14 years, raising $1.3 billion from well-known institutional investors in the United States. The firm survived several inquiries from the regulators. Walsh is known for his collection of teddy bears. (See: WG Trading Case Study; The WG Stroy)
Paul GreenwoodPaul Greenwood (1947 – ) is an American financier who co-founded WG Trading Company with Paul Greenwood. Walsh and Greenwood ran their Ponzi scheme for over 14 years, raising $1.3 billion from well-known institutional investors in the United States. The firm survived several inquiries from the regulators. (See: WG Trading Case Study)
Magnum PetersonMagnus Peterson is a Swedish hedge fund manager who founded Weavering Capital. Peterson started his career as an interest rate and foreing exchange trader at Skandinaviska Enskilda Banken, a major Swedish bank in Gothenburg. After shutting down his first fund due o the poor performance, Peterson established Weavering in 2003. Weavering raised over $600 mm for his flagship as he continue posting very stable monthly returns during the financial crisis.  (See: Weavering Case Study)
Prozess gegen MillionenbetrügerHelmut Kiener is a German psychologist and a former telephone book salesman. Kiener founded a fund of funds operation in 1988 after creating a semi-automated fund selection mechanism. With his successful track record, Kiener raised capital from both German retail investors and well-known financial institutions like Bear Stearns and Barclays. K1 Group managed almost $600 mm at its peak. (See: K1 Case Study)
Michael BergerMichael Berger is an Austrian hedge fund manager, who ran Manhattan Investment Fund. Berger came to New York in 1993, just before his 23rd birthday and opened Manhattan in 1996. Berger eventually raised over $575 million. Berger fled to Austria in 2002 after admitting his misconduct, but was arrested in 20067 by a Austrian highway policy.
Sam IsraelSamuel Israel III (Jul 20, 1959 – ) is an American born hedge fund manager, who founded $450 mm Bayou Management in Stamford, CT. Israel was born into a prominent Jewish family from New Orleans where the family built a fortune through commodity trading. Bayou suffered from severe losses right after its inception in 1997 and Israel decided to hide the troubles from investors. Israel fabricated his own suicide before serving the sentenced term. (See: The Bayou Story, Bayou Case Study)
Arthur NadelArthur Nadel (January 1, 1933 – April 16, 2012) was an American hedge fund manager, disbarred lawyer, piano player, and philanthropist. He managed a Sarasota, Florida based hedge fund Scoop Management Co., which has reportedly lost $350 million.
Paul EstacePaul Eustace is Canadian hedge fund manager who previously served President of Trout Trading Management, a prominent CTA firm established by his childhood friend Monro Trout. Estace established Philadelphia Alternative Asset Management in 2002 and amassed almost $300 mm before his scheme collapsed. (See: PAAMCo Case Study)
James NicholsonJames Nicholson (1966 – ) is an American businessman who established Westgate Capital, headquartered in Saddle River, NJ. Nicholson joined Shearson Lehman Hutton in 1998 after graduating from SUNY Stony Brook and changed the job at least six times over the following 10 years before launching Westgate. Nicholson’s new business was successful as its consistent track record attracted over $750 mm. (See: Westgate Case Study)
Lee and KimWon Sok Lee/John Kim/Yung Bae Kim, Korean-born American financiers, operated a Palm Beach, Fl-based KL Group and raised $200 million from a rich group of investors in Palm Beach. Lee, who grew up in Las Vegas, and Kims, from Virgina, started a day-trading operation in 1990 at a small apartment in San Francisco.
Kirk WrightKirk Wright ( – May 24, 2008) was an American financial adviser who defrauded several pro football players and other wealthy investors through International Management Associate, his Atlanta-based fund of hedge funds operator. Wright raised $150 mm from thousands of clients. After being convicted and facing maximum 710 years of a prison term, Wright committed a suicide in the Union City Jail, ending his 37-year life.
 

Non-Hedge Fund Descendants

Russell WasendorfRussell Wasendorf Sr (1948 – ) is an American financier who established Peregrine Financial Group. Wasendorf built an impeccable reputation as a prominent futures industry executive and served on an advisory committee of the National Futures Association. In September 2012, Wasendorf pled guilty to embezzling $215 million over the course of 20 years and sentenced for 50 years imprisonment. What makes more interesting about this story is this is the second collapsed financial institutions called Peregrine (the first, Peregrine Investments Holdings failed during the Asian crisis, but it was not a fraud, just a poor risk management).
Marc DreierMarc Dreier (May 12, 1950 – ) is an American lawyer and the sole equity partner of Dreier, LLP. This son of Jewish immigrant from Poland became a prominent lawyer, whom New York Magazine included as one of twenty “New York Super Lawyers, 2008 Edition”. Dreier is known for his lavish Park Avenue headquarter decorated with $30-40 mm worth of Picasso and Warhol. In 2008, Dreier was accused of $700 mm fraud for selling fictitious promissory notes to a large real estate company and hedge funds (he pleaded guilty in May 2009). Dreier confessed his crime in a 1h25m documentary “Unraveled” taken by Marc Simon.
Martin ArmstrongMartin Armstrong (Nov 1, 1949) is an American self-taught scholar and financier, who established Princeton Economics International Ltd. By 1985, Armstrong was regarded as one of the top premier FX analyst. In 1999, Armstrong was accused of having conspired with Republic New York employees involving Japanese investors. Republic New York later paid $606 million in a civil settlement while Armstrong was jailed for over 7 years on contempt after he refused to surrender $15 mm worth assets, including 102 gold bars. Armstrong pleaded guilty in 2006 and served another 5 years in jail. He currently lives in New Jersey.
 
 
Source: The Importance of Being Diligent, Wikipedia, Bloomberg, Reuters, Financial Times, Wall Street Journal, New York Times and other media