WexTrust owners duped Orthodox Jews
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Sometimes I despair about the quality of investigative writing on frauds.
Here is Robert Manor's view, writing in the Chicago Tribune, of the WexTrust ponzi:
"Our complaint alleges an affinity fraud of very large scale," said
Andrew Calamari, associate director of enforcement for the SEC. "In
this case, one of the defendants used his extensive connections in the
Orthodox Jewish community to solicit more than $250 million from
unsuspecting investors."
In affinity fraud, scammers target
individuals with a common interest or belief, which may include a
religious affiliation, to exploit their trust to obtain money.
That person in this case, according to court documents, was Shereshevsky, a resident of Norfolk,
Va. Shereshevsky pleaded guilty to conspiracy to commit bank fraud in
1994, a fact not disclosed to investors he solicited, according to
court papers."
The Wall Street Journal article on WexTrust and the WSJ Law Blog on WexTrust are not much better.
To con over $250 million out of a group known for its business shrewdness is remarkable, something quite out of the ordinary. As Charlie Munger would say, a lollapalooza effect.
It is simply not an explanation to say that this is an affinity fraud and move on. What about this group, at this time, and which sub groups allowed these two con criminals to steal a quarter of billion dollars? We cannot simply call this an "affinity fraud" and leave it at that.
Now, I am not blaming the regulators for their sparse explanatory story. Regulators don't have to explain anything, their job is to, ironically, cool out the mark.
To make sure that the whiners who lost their money stay sufficiently silent so as not to cast doubt on the overall integrity of the capital markets.
"When we call to mind the image of a mark who has just been separated from his money, we sometimes attempt to account for the greatness of his anger by the greatness of his financial loss.
This is a narrow view.
In many cases, especially in America, the mark's image of himself is built up on the belief that he is a pretty shrewd person when it comes to making deals and that he is not the sort of person who is taken in by any thing.
The mark's readiness to participate in a sure thing is based on more than avarice; it is based on a feeling that he will now be able to prove to himself that he is the sort of person who can "turn a‑fast buck."
For many, this capacity for high finance comes near to being a sign of masculinity and a test of fulfilling the male role." ...
A mark's participation in a play, and his investment in it, clearly commit him in his own eyes to the proposition that he is a smart man.
The process by which he comes to believe that he cannot lose is also the process by which he drops the defenses and compensations that previously protected him from defeats.
When the blowoff comes, the mark finds that he has no defense for not being a shrewd man. He has defined himself as a shrewd man and must face the fact that he is only another easy mark. He has defined himself as possessing a certain set of qualities and then proven to himself that he is miser ably lacking in them.
This is a process of self‑destruction of the self.
It is no wonder that the mark needs to be cooled out and that it is good business policy for one of the operators to stay with the mark in order to talk him into a point of view from which it is possible to accept a loss.
Of course we have evolved from having one of the operators cool off the mark to having the SEC and the Official Receiver combine to cool of the mark - give the appearance that monies will be collected on behalf of the victims.
