I'm learning a lot about how people defend themselves that are advertising and how traders are completely skeptical in nature... as I....
Skepticism is great. Rough and tumble debate is great. Good-natured ribbing is great. It's open and needless hostility masquerading as skepticism that sucks (and gets the response it deserves). Some guys think any opportunity to show skepticism is a great place to start lobbing molotov cocktails. Not sure why. I wouldn't make too many general conclusions about how advertisers defend themselves though. We certainly aren't typical in that regard. We've built some great connections over the years, and have some good stuff to offer the trading community as a result of organic growth from a simple original idea (creating a trading-based site to share the research we were already creating for ourselves). In that context, as things got bigger, getting the word out on ET seemed like a cool idea. That's about it.
FWIW - The words coming from Mike and Darkhorse are inline with what I have heard from guys that went for this type of deal. Does not seem "shady" or "scammy" at all. If a trader has a model or discretionary abilities but min capital this is a solid way to gain real traction. Rock solid thread that should be stickied for greatness in my opinion.
What is the name of the allocator you can introduce to? Anyone interested should be careful in this end of the business as well as prop firms. You are parting with the custody of your money, and in some cases larger sums than a typical prop deposit. There are a few legit ones, be it they all have poor deals for the traders but serve a purpose of increasing AUM. You can get a prop firm return audited by the way for a couple thousand dollars (if it is a broker dealer that is). BDs are required to have a yearly independent financial audit and that accounting firm will often agree to audit an individual's trader's runs for a few thousand dollars or less. Just inquire with a legit prop firm and they can ask their auditors.) Here's a recent warning on a First Loss fund from May of this year who got busted by the SEC for Ponzi like activities... There have been others which have turned out to be frauds as well over the years. Again, some are legit, some may be scams, so due your due diligence if you go in this direction. http://sec.gov/news/press/2012/2012-103.htm http://www.sec.gov/litigation/complaints/2012/comp-pr2012-103.pdf
Yes, that is the risky part. You are handing over a very large amount of money to someone else. They would never put "their" money in your account. They want you to put "yours" in theirs. One of the reasons traders like to trade prop is they accept the fact the prop firm could go under and they are out 5k, 10k or even 40k. But to hand over a million dollars or 500k? That takes a lot of trust. The CTA model really works better. I set up a CTA. If an allocator wants to give me capital, he keeps custody of his funds and I keep custody of mine. He can pull his money out any time he wants. Neither one of us can steal from each other and he can audit my performance in the meantime. This is the model that works and has worked for 4 decades. It's fair and more importantly, it's safe. You don't have to leverage your own money 10 to 1 which I personally think is insane. Again, I'm not knocking mercenary trader or saying his deal is bad. I'm speaking in broad terms here about the structure as a whole.
This. This is exactly what I do as well. I wouldn't put funds in anyone else's name except my own, even as an FLF. When I did my deal, my funds were in my name but used the cap allocators JBO or PB for the additional leverage. So while they didn't put their funds in my name, they did allocate leverage to me. That's an important distinction as well, and one that separates the fraud from the real thing. * If you are good enough to get a sizable allocation, then chances are that you will either be spun out into a CTA or join an existiing fund (and in rare cases get ur own fund LP from scratch). At that point, NONE of your money should be required (though you may wanna have some there) and the first loss provision should no longer apply. In addition, you will need to become registered with the appropriate body and so should the entity you are either forming or joining.
I will give any trader $1M to trade if he gives me $100k and I can say goodbye if that first $100k is lost. Hypothetically speaking, because I won't do it because it's ethically impossible to justify. Yes, that business model is so stupid it's almost not funny anymore. There is no way in this world that one descent, professional trader would fall in such a silly trap. It might be not illegal but you are fooling people and making false assumptions and only the STUPID traders would fall in the trap having you guys take profit out of weak people without risking ANYTHING. Where's your risk ? There's none.
+1 I'll give you guys custody of $1M of my money during the "trial" if YOU give custody of $100M after the trial is over
I think ur conflating the issues here. Of course there is no risk here. As mentioned earlier it's essentially a call option for the cap allocator. But so what? If they're legit then the traders upside could be unlimited. The downside is minimal cuz you would be trading your own cap anyway-- you're just agreeing to give up some upside for a shot at something bigger that u can't get thru prop.