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The 2008 crisis and transparency

Few words about the crisis according to Brian Quintenz Commodity Futures Trading Commission at the ICDA 39th Annual European Summit:

On September 16, 2008, exactly ten years ago this past Sunday, the Federal Reserve Bank of New York provided an emergency $85 billion loan to keep AIG, a global company with about $1 trillion in assets prior to the financial crisis, from a liquidity insolvency. When all was said and done, AIG lost $99 billion in 2008 and received over $180 billion in taxpayer funds to prevent its default.

AIG found itself in such dire financial straits through the activities of one division within the company, AIG Financial Products. That division wrote credit default swaps (CDS) on over $500 billion of assets, including $78 billion on collateralized debt obligations relating to residential mortgages of which $63 billion had exposure to subprime mortgages. When AIG established this directional CDS position, it did not post any initial margin with its counterparties or otherwise set aside capital for future potential losses. Instead, under the terms of these bilateral contracts, AIG was only required to post margin in the event the market value of the underlying mortgage-backed securities dropped, or if AIG itself suffered a credit downgrade. In fact, for an insurance company, AIG’s collateral situation was somewhat unique. Many of AIG’s competitors, including monoline financial guarantors, were not required to post any collateral until actual losses occurred.

In July 2007, after the credit ratings agencies downgraded their ratings of mortgage-backed securities, AIG received its first collateral call from Goldman Sachs. Surprisingly, up until these collateral calls, top AIG executives – including the CEO and Chief Risk Officer – were unaware of the collateral provisions in AIG’s CDS agreements that required AIG to post collateral if the market value of the underlying securities dropped. It soon became apparent that the Office of Thrift Supervision, which supervised AIG on a consolidated basis, also was not aware of the collateral provisions in these contracts.

From July 2007 onward, AIG disputed its requirements to post collateral with counterparties, arguing that AIG’s models showed no long-term losses on the underlying mortgage-backed securities. Counterparties countered that the contracts required AIG to post collateral if market value fell, regardless of the fact the losses were so far unrealized. And yet, even while these potentially crippling collateral disputes were ongoing, AIG’s CEO, Martin Sullivan, who would eventually step down as the company’s billion dollar losses mounted, continued to focus publicly on only the temporary capital effect of unrealized losses and the low probability of realized losses, describing the CDS contracts as so “carefully underwritten and structured … [that] we believe the probability that [the business] will sustain an economic loss is close to zero,” and stating in a November 2007 presentation that the underlying CDOs “would have to take losses that erode all of the tranches below the ‘Super Senior’ level before AIGFP would be at risk.”

What he did not describe, however, was AIG’s precarious liquidity position should margin calls be triggered by either mounting mark-to-market losses or a downgrade of the firm’s credit rating. This potential liquidity drain was further exacerbated by AIG’s securities lending activity, which invested a substantial portion of its cash collateral in illiquid mortgage-backed securities that became trapped in the credit freeze. Shockingly, despite that existential liquidity risk, AIG stated flatly in February 2008 that, “AIGFP…has the ability and intent to hold its positions until contract maturity or call by the counterparty.”

By June 2008, AIG had posted $13.2 billion of collateral with counterparties, causing a severe liquidity strain on the company. Then, on Monday, September 15, all three ratings agencies downgraded AIG, triggering an additional $13 billion in cash collateral calls. AIG was unable to meet these collateral calls, amassing a $12.4 billion unfunded exposure to its counterparties, and prompting the Federal Reserve to offer assistance.

If we want to avoid the next crisis, transparency is a must have.

If you ever wanted to know more about the financial lives of UK adults, now you can

If you ever wanted to know more about the financial lives of UK adults, now you can

The survey is the largest tracking study the FCA has commissioned.

The survey is trying to:

  • estimate the number of UK adults holding any one of around 70 products and to profile those who do and do not hold these products
  • understand consumers as people, and observe the financial behaviours and
    experiences they have in the context of their everyday lives
  • analyse results in different ways, to see, for example, where the young and old differ in their behaviour, or where some characteristics such as low income affect people in the same way whatever their age
  • demonstrate differences in behaviour and experiences by sector
  • identify and quantify harm or potential harm

Pages 14 – 15 are providing few insights, such as:

  • 50% of UK consumers currently show one or more characteristics of potential vulnerability (25.6 million) – they may be at increased risk of harm, or would suffer disproportionately, if harm occurred. Potential vulnerability does not mean all people with these characteristics will suffer harm.
  • People showing characteristics of potential vulnerability are twice as likely to have used high‑cost credit in the last 12 months as other UK adults.
  • At least 4.5 million UK adults say they have been declined a financial product in the last two years. Around half say they were unable to get the product they needed at all, while some say they ended up paying more or being subject to different terms and conditions.
  • Satisfaction with financial circumstances only notably increases from the age of 55: 21% of those 75 and over have low satisfaction.
  • 18‑24 years olds are least satisfied with their financial circumstances. 60% have low satisfaction.
  • 24% of UK adults have little or no confidence in managing their money, and 46% of all UK adults report low knowledge about financial matters.
  • 13% of 25‑34 year olds are in difficulty, having missed paying domestic bills or credit payments in three or more of the last six months.
  • 12.9 million adults (25% of all UK adults) have been overdrawn in the last 12 months.

 

Your health can hurt you

The Insolvency Service office (UK) published the following warning:

During Scams Awareness Month, people are being warned to be vigilant against rogue health supplement companies who target elderly and vulnerable victims.

Investigators found that call centre staff deployed a range of unscrupulous tactics, such as claiming to be ringing on behalf of doctors or other qualified health professionals while offering unregulated health advice, as well as phoning people registered with the Telephone Preference Service.

The Insolvency Service recommends:

  • Don’t stop taking prescribed medicine in favour of health supplements without speaking to your GP or pharmacist first
  • If you or a loved one think they have been a victim of a health supplements scam report it immediately to Action Fraud UK or get advice from Citizens Advice Consumer Service
  • Don’t rush into buying health supplements just because the seller is offering a good deal and if you’ve already made a payment, contact your credit card company and/or bank and tell them that you may have fallen victim to a fraud

Please find attached a link for the full warning and testimonials from victims.

The Information Commissioner’s Office reported that there were 8,454 nuisance marketing concerns reported to the ICO in April 2018 – an increase of 11% compared with March, it issued five monetary penalties in the same period, 1,551 spam text concerns were reported in April 2018 (increase of 261 concerns), there were 4,489 concerns submitted to the Telephone Preference Service in April (7% decrease from the figure for March), but overall year-on-year decrease in reported concerns (explained by: Successful investigations and enforcement action, Monetary penalties and enforcement action receiving widespread media coverage, Call blocking and SMS anti-spam technology, and regulatory actions).

It seems just a matter of time, until you will a get a call, text message, email, Whats-app/ Viber/Facebook/Telegram message, please make sure you are not next victim.

The Australians “fax” scammers

How did scammers make money in 2017? well, according to ACCC’s report more than 200,000 scam reports were submitted to the ACCC, Australian Cybercrime Online Reporting Network (ACORN) and other federal and state-based government agencies in 2017. Total losses reported were $340 million – a $40 million increase compared to 2016.

Moreover, investment scams topped the losses at $64 million, an increase of more than 8 per cent. Dating and romance scams caused the second greatest losses at $42 million.

The report demographics:

  • The age range with the highest reported losses was the 55–64 range which reported losses of $21.6 million.
  • Where gender was provided, women reported more scams but lost less money than men. Women reported 85,495 scams and reported losses of $37.9 million. Men reported 72,282 scams and reported losses of $51.3 million.
  • Women reported losing most to dating and romance scams with $12.7 million in losses, while men were most affected by investment scams, reporting losses of $22.8 million.
  • In 2017, Indigenous consumers reported $1.6 million in losses (across 1,810 reports). This represents a 12 per cent increase over the $1.4 million reported losses (across 1,499 reports) in 2016.

Contact methods:

  • The top two contact methods used by scammers in 2017 were phone (40 per cent) and emails (31 per cent). Phone-based scam reports numbered 65,097 with $29.1 million in reported losses. Email-based scam reports numbered 50,635 with $17.4 million in reported losses.
  • Phone call and text message-based scams increased in 2017 by 14,227 reports, but email-based scams decreased by 3,433 reports.
  • Phishing and identity theft scams were the most prevalent of phone-based scams with 20,220 reports but investment scams conducted over the phone resulted in the highest reported losses of $17 million.
  • When combined, online-based contact methods (those delivered via email, social media, mobile apps and the internet) amounted to 68,351 reports (representing 42 per cent of all reports) and $49.9 million in reported losses.
  • Reports about scams where contact was made via ‘social networking/online forums’ numbered 4,711 in 2017 with $15.7 million in reported losses.
  • Fax-based scams still occurred even in 2017 but only represented 0.1 per cent of reported scams. These scams are usually targeted at businesses.

The fax punch line is amazing. Please find attached a link for the full report.

Public officials and their public statements

You are invited to visit the public sector websites, and get news without the filters. News without the filters is amazing, your life will be much better, for sure!!!

In the U.S. the internet made the public sector more open and disclose, maybe block-chain will take it to the next level? The information is out their for you to read. It can help you avoiding fraud and misconduct. Simple government’s website search will do, and you will get the information you need.

Example (if you want expend your ICOs knowledge):

Public statement about ICOs (Steven Peikin, 15 May 2018):

I want to focus in more detail on this last category, in part because there has been a lot of public attention on our recent Enforcement activities in this space. As many of you know, in just a few years, cryptocurrency and ICO markets have grown from a mere concept into a phenomenon.

The novelty of ICOs, coupled with excitement about the potential utility of the underlying blockchain or distributed ledger technology, makes these offerings particularly enticing for some investors.

But the growth in the ICO market can obscure the fact that these offerings are often high-risk investments. The issuers may lack established track records. They may not have viable products, business models, or the capacity for safeguarding digital currencies from theft by hackers. And some of the offerings are simply outright frauds.

In a number of cases, the Commission has taken early action to stop or deter misconduct, protect investors, and preserve assets. One such matter involves charges against three co-founders of a purported financial services start-up who, we allege, orchestrated a fraudulent ICO that raised more than $32 million from thousands of investors last year.

In a number of our cases, there have been clear indicia of outright fraud, but the Commission has also brought cases to enforce the registration laws. Last December, we settled with a food-review startup after determining that the company’s ICO was an unlawful, unregistered offering. The company refunded investor proceeds before any tokens were distributed after the Commission intervened.

We have also suspended trading in the stock of numerous companies because of concerns about the accuracy and adequacy of information about the companies regarding, among other things, the adoption of blockchain technology.

We strongly believe regulated ICOs will protect the public better.

Also, please check out the SEC’s Office of Investor Education and Advocacy’s mock initial coin offering (ICO) website that touts an all too good to be true investment opportunity. But please don’t expect the SEC to fly you anywhere exotic—because the offer isn’t real.

 

 

Background Checks on Investor.gov

The Securities and Exchange Commission unveiled a public service announcement (PSA) to encourage investors to check the background of their investment professional by using the free search tool on Investor.gov before investing. Investor.gov, the SEC’s website dedicated to individual investors, provides investors with tools and resources to help them invest wisely and avoid fraud.

The PSA’s storyline involves a couple seeking advice from an alleged investment professional who turns out to be a fraud.  At first, the investment professional seems genuine, but as the conversation continues his fraudulent scheme quickly unravels. He uses high-pressure sales tactics – typically a red flag of fraud – to persuade the couple to invest, with statements such as:

  • You are definitely getting in at the perfect time
  • This investment opportunity will not last long
  • I can guarantee that your money will double
  • There’s absolutely no risk to you
  • You Just Made a BIG Mistake!
  • This is Your LAST CHANCE to Join The XXXXXXX and secure your financial future
  • Let Me Show You How to Make Cash LIVE Right Now
  • Ride The Wave of XXXXXXX And you could earn up to XXXXXXXXX In Exactly 24 Hours
  • Book the Profit NOW!
  • The opportunities to make money are enormous
  • The XXXXXXX Investment Jackpot Could Generate Massive Fortunes by XXXXXXXXX
  • you’ll receive XXXX of our hottest trades, targeting fast gains, using a variety of proven trading strategies to help you chase money-doubling or money-tripling profits.
  • Are you ready to rake in gains like 279%, 169%, or even 393% in just a matter of days?

The PSA stresses that most fraudsters are not this easy to spot and encourages investors to visit Investor.gov before investing.

It will not help you to get your money back, but it may save you from losing more.

People may try to use your lack of knowledge, try to surprise them, if you succeed it will be amazing.

Bitcoin auto-trading or anything alike

Please remember, those auto-trading services may not be regulated. They can tell you anything, and promise you the sky, but there is a chance you will not get your money back.

Please consult with your financial adviser, it worth your money. However, please remember that you should question your Financial Adviser work.

Do not use an advice without question it. You should do your own research, in order to question your Financial Adviser work.

Please make sure your your Financial Adviser is registered and license. The financial Adviser’s license is here to protect you, therefore, please make sure you check it.

If your Financial Adviser is not registered or license, you should not use its services/advice.

If you search on google “Bitcoin Trader auto-trading” you may get to https://gunbot.shop/store/ or https://www.ifcmarkets.com/en/contact-us, it seems that those websites do not have any valid/real license. If you invested through them, your money might be at risk.

It is not be fair to blame Google, they are not the regulator, but you can report about those ads to Google. Google might provide you more details about who is behind those ads, and/or stop such ads.

Some regulators are trying to fight back against those crypto frauds. For example FSMA (Belgium). FSMA issues the following:

List of cryptocurrency trading platforms about which the FSMA has received questions/complaints from consumers and has identified signs of fraud. Please find attached a link for the full list.

In addition, FSMA issued the following alert:

Cryptocurrency trading platforms: beware of fraud!

In recent weeks, a large number of new platforms offering all and sundry the chance to
invest in cryptocurrencies have appeared on the internet. The FSMA warns the public
about these new platforms, since often there are fraudsters behind them who are now
using cryptocurrencies to swindle consumers. Please find attached a link for the warning. If you heard/read the following, then you should read the alert again:

“Invest in cryptocurrencies with full confidence.”
“Invest in digital currencies in full confidence on one of the most renowned platforms on the market.”
“XXX: trading in cryptocurrencies easily accessible at last!”

Sec statement and DC Blockchain Summit March 7 2018

Please note that according to the sec statement as of March 7 2018:

The SEC staff has concerns that many online trading platforms appear to investors as SEC-registered and regulated marketplaces when they are not.  Many platforms refer to themselves as “exchanges,” which can give the misimpression to investors that they are regulated or meet the regulatory standards of a national securities exchange.  Although some of these platforms claim to use strict standards to pick only high-quality digital assets to trade, the SEC does not review these standards or the digital assets that the platforms select, and the so-called standards should not be equated to the listing standards of national securities exchanges.

Please find attached a link for the full statement. Please don’t get confused, and remember that some “exchanges” are not regulated by the sec.

Highlights from the keynote Address by Commissioner Brian Quintenz before the DC Blockchain Summit:

in the spot markets for commodities, neither the CFTC nor any other federal agency has that same oversight authority. This means the agency cannot impose things like registration requirements on platforms or participants in the cash markets, surveillance and monitoring requirements on spot platforms, or otherwise require compliance with business conduct standards or other trading requirements. The CFTC only has enforcement authority to police fraud and manipulation in the actual trading of commodities. Pursuant to this enforcement jurisdiction, the CFTC can investigate potential fraud and manipulation in the underlying virtual currency spot markets.

I think we’ve come to the point with cryptocurrencies where an independent body must step up, establish, and enforce the rules of play. It is my hope that cryptocurrency platforms in the United States will consider the many benefits, including enhanced credibility, that the establishment of an SRO-like organization may provide. Moreover, in light of the global market for cryptocurrencies, and the efforts currently underway in the United Kingdom and Japan, there is no reason why a private, cryptocurrency oversight body could not achieve global significance.

Please find attached a link for the full keynote address. It means that the Cryptocurrency world is not fully supervised and regulated. Moreover, if the local players will cooperate together fairly, it will be for the best interest of the Cryptocurrency market (all players and clients alike).

Additional stories worth reading

Please find below few stories worth reading (Chicago, Ill. introducing broker Fortune Trading Group, Inc, Telegram ICO, pump-and-dump classic story and the latest from Information Commissioner Office):

  1. NFA permanently bars Chicago, Ill. introducing broker Fortune Trading Group, Inc. from membership, bars its principal and associated person Jonathan Schuler from membership for five years, and orders Chicago, Ill. futures commission merchant Ironbeam, Inc. to pay a $100,000 fine – if you will read the full story (please find attached a link), you will understand that even if regulated entity promise you large profits, you should be skeptical. Moreover, if someone offers you large profits without mentioning the other scenarios, just stay away from the offer. Simple as that!!!
  2. Fake Website Scam Targets Aspiring Telegram ICO Investors – it is important to be aware that some fraudsters are using the Telegram ICO hypes to make quick profits.
  3. What is pump-and-dump? well, the attached story will provide an answer (it is a classic pump-and-dump case). You should really be careful with those Microcap Stocks trading. Microcap Stocks can be easily maneuver, and statscally they are more exposed to pump-and-dump schemes.
  4. ICO is also UK Information Commissioner Office initials. You should know that you can report about nuisance calls or any other issues related to your Data Protection.
    You can review their Enforcement action on the attached link, and more about them in general in the attached link.
    Please find an example for their latest Enforcement action:
    Firm previously fined for making nuisance calls is prosecuted for continuing to break the law:
    Direct Choice Home Improvements Limited had been fined £50,000 by the ICO in 2016 and was also issued with a formal Enforcement Notice, ordering it to cease contacting people registered with the Telephone Preference Service.
    It continued to make unsolicited marketing calls, however, and so was prosecuted under the ICO’s criminal enforcement powers.

Please make sure your broker is registered

The Securities and Exchange Commission charged three-time recidivist Steven J. Muehler with operating an unregistered broker-dealer, facilitating an unregistered securities offering, and defrauding small businesses, while promising to help them raise money from investors.  Three companies under Muehler’s control, Muehler’s wife, Claudia M. Muehler, and his associate, Koorosh “Danny” Rahimi, were also charged. Because the scheme is ongoing, the SEC is also seeking a preliminary injunction to stop Muehler’s ongoing violations of the securities laws, pending trial of the action.

According to the complaint, Muehler’s companies are not registered as broker-dealers. But since at least November 2015, Muehler and his companies have nonetheless agreed to provide broker-dealers services to more than 20 small businesses, including identifying and soliciting investors and utilizing a purportedly proprietary online securities exchange to help raise funds from investors. In return, Muehler and his companies received fees, the right to a percentage of any funds raised from investors, and the right to an equity stake in each small business customer.

The SEC also alleges that in offering broker-dealer services, Muehler and his companies made numerous fraudulent claims to potential customers, including that Muehler and his companies had $50 million on-hand to invest in their customers’ securities, that they had previously helped customers raise millions of dollars, and that their proprietary online exchange was registered with the SEC. They also concealed that Muehler is subject to a Commission cease-and-desist order and has been sanctioned by California and Minnesota securities regulators.

The SEC’s complaint alleges that Claudia Muehler and Danny Rahimi helped Muehler carry out this scheme.

The complaint also seeks permanent injunctions, disgorgement plus interest, and penalties.

Please find attached a link for the full story.

Please remember, it does not matter who or what, just make sure you search the online database, and make sure your broker name appears in it (if things go wrong, it may protect you).