Ok fair enough. Well, I know one of the most connected groups on the east coast. In CT to be exact. If anyone wants a hook up. I also know one of the biggest allocators on the west coast. I can provide the intro there as well. Both are connected to billion dollar funds. I won't ask for a penny in return. Just contacts I've made being in the business for 15 years. I'll let you know how many people contact me. I doubt there will be much interest as I've gone over the details pretty much on this thread.
Wow. I spoke too soon. Man, this is the kind of shit I'm talking about. Anyway, I knew these guys on the west coast and sure enough, they get busted by the SEC. This is why you need to be careful who you are giving your money to.
These are some "highlights" from the .pdf that Mav just provided a link to: 27. The Latvian trader wired $5,000 of his own money to the Canadian entity as a risk deposit. Alchemy then used the trading software to extend the Latvian trader $200,000 in âbuying powerâ through Alchemyâs account, which was a portion of the trading margin that Alchemy received from its registered broker-dealer. Although Alchemy extended credit to the Latvian trader to purchase securities, Alchemyâs capital was not ultimately at risk because it was entitled to recoup losses from the Canadian entity and the trading software allowed Alchemy to see the Latvian traderâs trading in real time and automatically cut off his trading access if he or other traders referred by the Canadian entity incurred losses greater than the Canadian entityâs deposit balance. 36. KM used the trading software to extend the trader $50,000 in âbuying powerâ through KMâs account, which was a portion of the trading margin that KM received from its registered broker-dealer. Although KM extended credit to the Latvian trader to purchase securities, KMâs capital was not ultimately at risk because it was entitled to recoup losses from the Latvian trader and the trading software allowed KMâs principals to review his trading in real time and would automatically cut off his trading access if trading losses caused his deposit balance to fall below $1,000, effectively allowing KM to ensure that he would never lose money in excess of his deposit balance. 41. During the relevant period, Zanshin, and McDonald, through Zanshin, received sponsored market access from a registered broker-dealer and passed the sponsored market access on to traders through a referral firm that solicited traders through its website and referred them to Zanshin. 54. Under the independent contractor agreement, Mercury charged the Canadian entity a monthly fee of $3,000 plus a âclearing feeâ of $0.10 per thousand shares traded, which exceeded the commission of $0.065 to $0.085 that Mercury paid its registered broker-dealer. Frederick was one of the individuals responsible for setting the fee and commission rate and directing Mercury to charge transaction-based compensation for extending the market access. 55. Mercury, at Frederickâs direction, required the Canadian entity to make an initial risk deposit of $75,000 and made the Canadian entity responsible for 100% of any trading losses that its traders incurred through Mercuryâs account. 60. On 134 occasions between September 2009 and August 2010, the Latvian trader made profitable trades through an omnibus account of Alchemy, KM, Zanshin, or Mercury contemporaneous with unauthorized trading in the same securities in hijacked online brokerage accounts at multiple U.S. broker-dealers. Account Intrusions 61. On each occasion, the Latvian trader first established a long or short position in a security through Alchemy, KM, Zanshin, or Mercury. Then the Latvian trader surreptitiously gained access to an online brokerage account and made large unauthorized trades in the same security to manipulate the stock price in his favor. Finally, during or shortly after the manipulative trading in the intruded account, the Latvian trader closed out his position through Alchemy, KM, Zanshin, or Mercury at the artificial market price to generate a profit. 62. The Latvian trader generated ill-gotten gains of $760,051 from the scheme through the electronic trading systems provided by Alchemy, KM, Zanshin, and Mercury.
Nothing like some great thieving market manipulation... that guy should be sentenced to work with me shoveling gravel and digging trenches with me for a year.. see what its Los to have to earn your keep!
This SEC bust is about all the unregistered sub 'prop' groups. Alchemy itself may have had some functioning as more of an allocator type, but the rest of these entities are simply unregistered LLCs. Fredericks is the same guy from Tuco Trading. These are all unregistered, and in these cases, offshore BDs. So the same goes for allocators, offshore / non-us unregistered prop groups, and of course, official BDs with crappy financials. Most are safe, but there's plenty of public info out there.
Yes, absolutely. Be very careful and deeply scrutinize everything - the contract, the broker dealer, historical references of deals done, etc on and on. Everything relating to money, or placing money, requires sharp eyes, a clear head, and due diligence. Peregrine Financial was a reminder of that. Conducting DD should be the hallmark of any sufficiently smart / savvy trader in the first place, which is the only type of trader who should be interested in allocation anyway. For this reason, the "be careful and do your homework" admonition seemed kind of obvious to us. Professional race car drivers don't have to be told "drive carefully." On the other hand, having a conversation and simply checking out an allocator's bona fides has no risk, other than a handful of phone calls or emails. There's a big difference between kicking the tires, looking under the hood, and actually making a decision involving capital. Again it seems a reasonable assumption that anyone with the risk capital and chops to pursue such an opportunity is a big boy who has been around the block a couple times. Especially in times like these, it doesn't take a lot of common sense to realize you have to watch your commitments very carefully in the financial world. But the spirit of protection and warm-hearted looking out for all the gullible yo-yos on ET ready to give a large sum of money to a guy in a trench coat on a street corner is laudable. You guys are like Mother Hens doing God's work, congrats. Thanks for that too, an important service for those who couldn't click on the PDF and scan the contents themselves. Post-it note to self, don't get involved with Canadian / Latvian subdeals that sound like the plot to a Jason Bourne flick.
I think it goes to show that these structures are filled with holes. If one is risking 5k or 10k that is one thing. But putting 500k in one of these? Hell no.
Exactly what many investors would say about investing with any hedge fund manager in existence. Which is fine, let them stick with Vanguard. Not to mention that 500K, 250K, 10K, whatever, is relative. For some people even $50,000 is an unimaginably huge sum that feels like all the money in the universe to them. For others it's a single all-in bet in a shits-and-grins high stakes poker game. Life is relative. Investing in anything on large scale is potentially "filled with holes." Trading anything on large scale is potentially "filled with holes." Putting your capital anywhere except the FDIC-insured bank down the street is potentially "full of holes." (And hell, who even knows how safe the local bank is anymore.) If, however, you have first rate prime brokerage, first rate verifiable deal record, first rate verified connections and past history of placements, and a legitimate chance at seeding a transition from small-time into big-time, then at some point you look at the opportunity -- if it serves as a possible trajectory for your profile, goals and aspirations -- and decide how big your cojones are. That's what due diligence is for, and it's the reason calculated risks can pay off for those who take wise ones. Yes you have to take care, as all our mothers and grandmothers have reminded us. But as Wayne Gretzky said, "You miss 100% of the shots you don't take." I think the "be careful" message has duly been underscored in triplicate and quadruplicate by now.
We see how the scam works. The allocator made money on all margin which is charged to the trader. So what you need to do is know your costs, and anyone who trades futures would be stupid to do one of these deals. Instead, if you get good enough and want to manage money, go the CTA route. Maybe they should allocate $ 1 million to ammo, he held overnight with no stop, but was man enough to finally take a loss after averaging up into this trade against a raging bull market. 08-09-12 08:39 PM Quote from ammo: add 02.avg 92 .95 reduced 94.5 - 1 .55 Attachment: 2012-08-09-tos_charts.png 94-95.png This has been downloaded 6 time(s).
What scam? What are you talking about? All that effort to make a couple bucks on margin charges? Maybe if you're going with a bucket artist instead of a top operation... for a genuinely first class allocator, the benefits of seeding a trader, making a traditional investment in a profitable program, getting the manager credibly vetted and introduced to a network of HNWIs and on the path to full institutional backing, can result in mutually beneficial gains exponential orders of magnitude beyond the potential payoff from nickel and dime margin charges. Re, "if you trade futures you should be a CTA"... yeah, that was covered. And if you trade collectible teacups you should get on Antique Road Show. Alternate routes for alternates to equities, check. Point established. Who is ammo and why is he relevant to this discussion? Last but not least, what raging bull market? You mean the present rally based on a European political statement and ghost vapors of stimulus hope, on declining trading volume that just hit the lowest levels in 5 years? "We can't bust heads like we used to, but we have our ways. One trick is to tell 'em stories that don't go anywhere - like the time I caught the ferry over to Shelbyville. I needed a new heel for my shoe, so, I decided to go to Morganville, which is what they called Shelbyville in those days. So I tied an onion to my belt, which was the style at the time. Now to take the ferry cost a nickel, and in those days, nickels had pictures of bumblebees on 'em. 'Give me five bees for a quarter,' you'd say."