New York-area hedge fund manager charged with Ponzi fraud

[d08]

I know of at least one person who got caught up in this kind of madness and ended up taking his life over it. I don't think these people start out intending to defraud and deceive, they just can't be honest upfront when shit starts going south and then it builds on itself.

Scronic began scamming clients from day one, when he launched what he said was the Scronic Macro Fund, the government said. It didn’t exist. Beginning in April 2010, Scronic reported positive returns in every quarter but one; he actually lost money in every quarter except the first, the U.S. said.

Why does everyone on ET assume the best about these guys. From what I've read in other cases, many have started funds with the idea to scam. Leveraging credentials to rip people off. They have people offering millions and know they have no plan but don't care - "hey at least I'll make 1%, what's the worst that could happen".

 

[mlawson71]

It`s denial & living in the now... Like some have stated, they all start with sincere intentions & delusions of grandeur... They compound their disasters quickly by averaging losers, quickly arriving at the "praying stage" of train wreck of a position.
Ego is the most dangerous trait of all as they simply attempt to "trade their way out" because someone oh so intelligent with a shit sheepskin from Stanford could not possibly this wrong, this often.... so the story repeats itself many times over.

You're probably right. This is such a terrible combination of selfishness and immaturity, it's fascinating.

 

[algofy]

Scronic began scamming clients from day one, when he launched what he said was the Scronic Macro Fund, the government said. It didn’t exist. Beginning in April 2010, Scronic reported positive returns in every quarter but one; he actually lost money in every quarter except the first, the U.S. said.

Why does everyone on ET assume the best about these guys. From what I've read in other cases, many have started funds with the idea to scam. Leveraging credentials to rip people off. They have people offering millions and know they have no plan but don't care - "hey at least I'll make 1%, what's the worst that could happen".

I think just trying to assume that there are good people who do bad things and there are also bad people who always do bad things. I have personal experience in dealing with someone who was a good person but just did a bad thing...wait, that's bloodline, oh well.

 

[JSOP]

Actually, as personalities go, the institutional side is probably worse.

Actually, I think I have met the guy somewhere. What amazes me is none of these people have done their due diligence - starting from his track record and finishing with his admin setup.

His degrees from Stanford and University of Chicago and then his stint with J.P. Morgan, that's people's due diligence right there. Stanford, J.P. Morgan!! Wow!! How can you be wrong with those institutions?!! He's an insider; he has special knowledge of inner working of the investment industry and how to invest in those sophisticated instruments like Options. All he had to throw in a few terms like delta, theta, implied volatility and people are hooked and all of sudden there is this aura of specialness around him. This guy is a guru; this guy is a genius!! And then all it takes is ONE guy to invest with him. I am SURE at first he was returning money back to his first batch of investors especially when he was making +ve returns in the beginning. And the words get around, "I invested with so and so and earned 10+% return, look here is the money. This guy is the real deal. He has a degree from Stanford, University of Chicago and used to work for J.P. Morgan..." and the crowd effect takes over. If the Jones has invested with him and earned 10+%, we have to invest with him too. We can't lose to the Jones; we will look cheap and stupid. Before you know it, the whole neighbourhood and his circle of friends are all in - he's my best friend since elementary school; he can't be conning me money and then more money get conned in, the more people start to put more money in and on and on and on and everything just snowballs on.

That's how Ponzi scheme works, as long as withdraw requests are met, nobody questions it and just keeps putting in money. And the tragic thing is more money that people put in, the better the scheme will actually hold. It's really a self-fulfilling prophecy. Everybody just keeps playing this music chair game and the problem happens only when the music stops. All it takes is just ONE person to start to withdraw more money than what the scheme can give back and can't get it all back and then all of sudden everybody discovers that there is only ONE chair and everybody is left standing. That's how people got hooked on Madoff and that's how people got hooked on this schmuck and how everything crumbled at the end.

All it takes is one person to have the scheme kick into success and all it takes is one person to crumble it.

 

[sle]

That's how Madoff conned people and this is how this schmuck conned people.

I am tempted to say that these people are great intuitive psychologists that get people to trust them without any real basis (btw, its possible that's how the guy got into Stanford and got hire). Someone told me a funny study about how wearing a tie makes people trust you more (the actual study was something like "two guys were asking for a quarter on a bus stop - one was wearing a tie and he collected 2x more").

 

[JSOP]

I am tempted to say that these people are great intuitive psychologists that get people to trust them without any real basis (btw, its possible that's how the guy got into Stanford and got hire). Someone told me a funny study about how wearing a tie makes people trust you more (the actual study was something like "two guys were asking for a quarter on a bus stop - one was wearing a tie and he collected 2x more").

It's absolutely true!! People judge appearance, diplomas and workplace more than anything else. Just look at Forrest Gump. He was an outstanding football player, a decorated war hero and a multi-millionaire from being an outstanding businessman but the way he looks and talks and acts, people would've never taken him seriously and given him any time of the day.

It's amazing how much we are conditioned to make assessment about a person according to sometimes artificial things that don't necessarily reflect the true quality or ability of that person. And we call it "intuition". LOL

 

[Visaria]

Forrest Gump is a fictional character.

tbh, ive invested in people/investments where i didnt do any due diligence and subsequently lost the lot. My saving grace was that the amounts in question were tiny like 10 basis points of my NAV so no damage at all. im amazed at those who invest their entire life savings.

 

[SteveH]

Yet another sign of a major top coming.

 

[Pekelo]

lost money in every quarter except the first, the U.S. said.

Why does everyone on ET assume the best about these guys.

Actually your quote proves the exact opposite what you are saying, the dude did make money in the first month. So he could have started out with good intentions, just couldn't make money.

 

[d08]

Actually your quote proves the exact opposite what you are saying, the dude did make money in the first month. So he could have started out with good intentions, just couldn't make money.

It's entirely possible it was luck. You can literally be a monkey and have one good quarter throwing darts.