Details of Kirk Wright Indictment
A number of details have emerged from the amended indictment against Kirk Wright, which appear not to have been reported in the various news accounts, here and here. No one seems to have read in detail either the indictment or the FBI's news release. The news reports continue to talk about an $185 million ponzi scheme and the disappearance of most of that sum.
But, it is very unlikely that Kirk Wright ever had anything like $185 million under his control, or the control of his hedge funds. As the indictment makes clear, he is alleged to have lied about both where the money was being invested, and how much money the various funds had in their control.
To accomplish this, the indictment alleges that he simply put the investor's money in an account called, I suppose, creatively, the "IMA expense account" and used the proceeds of it to pay himself, and his partners. The indictment the alleges that he simply sent false statements by mail to his clients and counted on them being happy with what the statements reflected.
Charles Ponzi used a similar scheme in 1919. As Donald Dunn, writes "after receiving notification of their 50% return, Ponzi could imagine the activity". While some would rush to cash in on their good fortune, "others would take their time, convinced by the fact that they had a one cent post card, they also had a 50% return on their investment. They would read the card over, show it to their wives and relatives. ... Back at their jobs, at the restaurants, at the recreation halls, they would tell others of their stupendous good fortune -and the ones they told would come running. Each satisfied customer would become a salesman, self-appointed." (my emphasis)
As many of the ponzi scams have shown, the ability to manufacture false returns or statements of accounts in critical to the success of the scam, or fraud. And as one astute reader has already pointed out, "It seems that money deposited into a legitimate custodial account is then deposited into a "black hole" with no further accountability". Are the institutions who provide the custodial accounts innocently enabling fraud? Do they have any liability for this, if so? Interesting questions.
Technorati Tags: ponzi scheme, charles ponzi, indictment, news reports, news release, donald dunn, money, fbi, hedge funds, expense account, ima, proceeds, kirk wright
