by Brian Mahany
Ponzi schemes are a dime dozen these days. When I read a press release from Manhattan District Attorney Cyrus Vance about another creep, Brian Kim, who stole money from clients I wasn’t surprised. Kim’s actions after his indictment and the comments made by his attorney in court, however, are worth discussing.
First, the charges. Prosecutors say that Kim ran a hedge fund called Liquid Capital Management. Between 2003 and last year they say he stole $6 million from approximately 45 of his clients. He was separately indicted for also stealing $430,000 from a condo complex where he lived. Between the two crimes, he was charged with multiple felonies including Grand Larceny, Forgery, Scheme to Defraud and Bail Jumping.
The bail jumping charge was added when he disappeared on the eve of his trial. Ultimately he was arrested in Hong Kong and brought back to the U.S. (with new charges of passport fraud.)
Kim’s hedge fund case is a classic Ponzi scheme. Money from new investments was used to pay off earlier investors. Ultimately the house of cards always falls when there simply isn’t enough money to pay everyone.
Investors were promised rates of return of up to 240%! To fool investors, prosecutors say he produced phony statements that made new investments look like profits. On paper, investors thought they were making money. Of course, there simply wasn’t enough to go around when his clients began to get nervous and wanted to cash out.
Where did the money go? The government said much went to payoff old investors to keep the illusion going while the rest went into Kim’s pocket. Gambling, skiing and shopping excursions were apparently all financed with his victims’ hard earned money.
Up to this point, it appears that Kim was just another greedy thief. His conduct was certainly bad and warrants a long prison term.
Society hopes that people finally understand their misdeeds and can express genuine remorse. It doesn’t make things any easier for the victims but at least we know that the fraudster understands the gravity of his crimes.
Does Kim understand what he did? I don’t think so.
According to press reports, Kim told the judge that he had no malicious intent. This is a man who fled on the eve of trial and used a false passport to hide. It’s also a man who generated elaborate forgeries to hide his crimes so that he could live a life of privilege. It’s one thing to shoplift groceries to feed one’s family. It’s illegal but there might not be malicious intent. Stealing millions to go shopping is the definition of malicious, however.
If Kim’s statements are enough to convince you, his lawyer told the judge that Kim already “suffered for his crime.” It’s a bit disingenuous to talk about suffering when your spending your victims’ money while on the lamb.
To his credit, Kim did plead guilty and appears to be cooperating. Will his victims ever see their money? Probably not.
The purpose of this story is to remind everyone that if an investment seems to good to be true, it probably is. Yes, there are a few exceptions to the rule but a bit due diligence will often expose these frauds before you lose your money.
The investment fraud lawyers at Mahany & Ertl help victims of securities fraud, mortgage fraud, accounting and legal malpractice and Ponzi schemes get back their hard earned money. If you think you have been ripped off or scammed don’t delay. In many of these cases the only people who get paid are the those who come forward first.
Mahany & Ertl – Giving Victims A Voice. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. Services available in many jurisdictions.