Feds Nab $100M Hedge Fund Fraudster

We have a new admission to the "Worst" category of money fraudsters. Marc S. Dreier has now been arrested in a $100M fraud schemes. Basically, Dreier forged the return on investments by clients and took home the profits. Sorry to say that $100M is nearly chump change to recent losses in the financial sector--its still bad, Dreier.

From NYTimes.com

...when the lawyer, Marc S. Dreier, stepped off a flight from Canada on Sunday night, federal authorities in New York arrested him in a $100 million fraud scheme, portraying his recent undertakings as more high-stakes grifting than high-end lawyering.

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Update: Hedge fund Manager turns himself in

On June 11, we reported that Samuel Isreal III failed to report to jail for fraud convictions, and his car was found abandoned on a bridge over the Hudson River.

The New York Times reported that Israel turned himself in to the local jail in Southwick, Massachusetts, according to authorities on Wednesday, July 2. He will be transported back to Ayers, Massachusetts, where he will likely serve out his sentence of twenty years in prison.

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News Update

Over the past week, we’ve brought you up-to-date news on the latest current events occurring during the current credit crisis happening in America. Yesterday, we reported that Bear Stearns employees Ralph Cioffi and Matthew Tannin were going to be arrested for fraud dealing with a hedge fund account.

The Arizona Republic sheds more light on the situation this morning. In April 2007, they became aware of the current situation when an internal report was released. One of the emails that was written around that time period by Tannin states:

The subprime market looks pretty damn ugly. If we believe the (report) is ANYWHERE CLOSE to accurate I think we should close the funds now. The reason for this is that if (the report) is correct then the entire subprime market is toast.

The two were officially charged with charges of conspiracy and securities and wire fraud for lying to the authorities about the state of the hedge fund. They could both face up to twenty years in prison for these charges.

We also reported on the current mortgage crisis. The FBI has moved agents to different segments in order to deal with the current state of the mortagage business, trying to capture the rampant fraud on the market. This report at the Chicago Times reports that 67 people were charged in mortgage fraud, from builders to loan officers. The three scams targeted were: lending fraud involving false loan applications and bogus real estate appraisals; foreclosure-rescue scams in which financially strapped homeowners lose ownership of their properties to criminals; and mortgage-related bankruptcy fraud. Bonnie L. Brown was the ring leader, and obtained 183 homes through fraudulent loans worth more than $124 million. There were 28 more people in Michigan charged with mortgage fraud according to the Detroit Free Press.

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Bear Stearns Employees Arrested

In breaking news from Reuters, they divulge information that two former hedge fun managers at Bear Stearns were arrested after authorities investigated the collapse of their hedge fund. Ralph Cioffi and Matthew Tannin are expected face security fraud charges. The two funds they were managing collapsed and it is one of the causes for the current credit crisis.

According to Reuters, there was an email that is expected to be very important in the case:

The indictments are expected to cite a personal e-mail sent by one manager to the other that appeared to suggest the Bear funds were in difficulty, days before one of the managers told investors that he was comfortable with the holdings, according to the Wall Street Journal.

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Fraudulent man fails to report to jail

The New York Times discloses that Samuel Israel III failed to show up on Monday, June 9, for his sentence of 20 years in prison. Israel, a former hedge fund manager and co founder of the Bayou Group, received the sentence after cheating his investors out of $450 million. He plead guilty to these accusations in 2005.

On Monday, his sport utility vehicle was found on a bridge over the Hudson River, with the message “Suicide is Painless” etched into the hood. His whereabouts are unknown, and a body has not yet been found.

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