Entrust Capital Management Fraud
Image by Renegade98 via Flickr
On September 28th, 2006 a Shrewsbury investment adviser was charged with fraud today by a federal Grand Jury in connection with a scheme that bilked 15 investors of approximately $13 million.
"One year after he was convicted of 20 counts of mail and wire fraud, a former high-flying investment adviser is finally scheduled to be sentenced this afternoon in federal court, from a storyabout the Entrust Fraud by Jay Whearely in the Telegram.
In 2007, Amit Mathur, 38, formerly of Shrewsbury, was convicted of swindling an estimated $13 million from five investment clients, the lion's share of that amount from prominent local banker David G. "Duddie" Massad.
The entire indictment can be read here.
The SEC charged Mathur and others last year, and revealed a number of interesting details about this hedge fund fraud worked.
First, how did Mathur convince investors about the pedigree of his firm?Apparently, he simply stole the materials copying Entrust Northeast's website.
Second, how did Mathur think he was going to close down his little hedge fund fraud. The hedge fund had large trading losses, legitimate losses.
How did Mathur make money with losing trades? Simple, 90% of the commission owed to the brokerage doing the trades were kickbacked to Mathur.
Third, how did he keep his investors convinced of his skill? The oldest trick in the books, fake statements of return.
Why bother taking the time to doctor a cheque, when you can easily doctor a statement as Charles Ponzi completely understood.
Fourth, some of the money Mathur stole from his investors wound up in real estate deals -which actually made money! But Mathur apparently would rather scam than be honest, the Yellow Kid would have understood this.
Fifth, the largest investor lost over $11 million was a well respected banker.
The moral: due diligence has to be continuous.