The stories of three recent scam artists; how they pulled off a heist and how you can protect yourself
Small-business owners work very hard for their money. When a business becomes successful, it’s either sold for a large profit or it produces significant amounts of cash that can be taken out of the business instead of reinvested. In either case, the owners must decide what to do with the money.
Unfortunately, many wealthy entrepreneurs lack the skills to evaluate investment opportunities, falsely thinking that being a good entrepreneur makes one a good investor. It’s seldom the case.
Scam artists know this and they act accordingly, separating business owners from their fortunes even in the post-Madoff world. The three examples that follow are of scam artists who have pulled off their shenanigans quite recently.
3 successful scam artists
John Mattera, the head of Praetorian Global Fund, claimed to own millions of dollars in stock in Groupon, Facebook, Zynga and other private companies. He offered to sell these shares to investors before the companies completed an initial public offering (IPO). And he claimed that they would be able to sell their shares at a huge profit on the day of the IPO.
Mattera collected $11 million in capital from investors through intermediaries like Spartan Capital Partners, which did most of the direct marketing to potential investors. But Mattera did not own any shares in the companies and used the proceeds to fund a lavish lifestyle until his arrest.
Philip Baker, principal of Chicago hedge fund Lake Shore Asset Management, was recently sentenced to 20 years in federal prison for bilking investors of nearly $150 million. The fraud in this case was subtle and quite damaging. Baker lied to investors about the profitability of the hedge fund, reporting gains while he was losing money. He took $30 million for his personal discretionary and investment use.
Claudio Osorio, using his company InnoVida, promoted perhaps the most painful and ludicrous recent case of fraud. Osorio’s company claimed to have developed a cost-effective method for fabricating housing for impoverished people that could improve the lives of millions around the world. He even promised to donate 1,000 free homes to poor Haitians as part of a 32,000-home-development project in that country. Osorio recruited investors by inviting them to his lavish $12 million estate on Miami’s Star Island and showing them financials that indicated the company had more than $100 million in assets, including $25 million in cash.
