Tue, Nov 25, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Opalesque Futures Intelligence

Book Review: PonziMonium

Friday, January 13, 2012

CFTC's First Educational Outreach Effort Touches on Key Agency Mission: Investor Protections

Bart Chilton Quick Facts:

Commissioner, Commodity Futures Trading Commission (CFTC)
Favors prosecuting violations of law in commodities markets
Author, PonziMonium
Deputy Chief of Staff, U.S. Secretary of Agriculture
Assistant to Board, Farm Credit Administration
Legislative Director, U.S. House of Representatives

Ponzimonium is the 65 page tome written by colorful CFTC commissioner Bart Chilton showing investors how to avoid being victim to investment fraud.

Mr. Chilton's motivation for writing the book was clear. "In the wake of the Madoff scandal, I kept seeing all these Ponzi cases – mini-Madoffs, if you will – at the Commodity Futures Trading Commission (CFTC)," Chilton noted. "It got me thinking about how many folks were duped were pretty savvy folks. I took these ten cases and tried to make them not sound like it was written by a Government bureaucrat."

https://encrypted-tbn0.google.com/images?q=tbn:ANd9GcQif5qwTPaSfG9uFd2Y8ppqCLTrjpI5gSDeleqGh6L-7PdejIeiQQWith shoulder-length blond hair, Mr. Chilton doesn't need to worry about sounding like a boring government drone. Known as an avid music lover, the guitar strumming CFTC commissioner's book is essentially broken down into ten stories of Ponzi schemes, each with a slightly different educational message for investors, with back matter that includes an investor bill of rights, red flags of fraud and a resources section.

"Ponzimonium is the only consumer education piece we have at the agency," he said, noting with impatience the fact the CFTC just hired a just hired someone to head up a new consumer education and outreach office, something he's been calling for since 2008.

On balance the book is well written, typically focusing on retail investors. However, nuggets of wisdom can be found for the professional investor. Primary educational messages in the book include advice that investors not invest in un-regulated entities or individuals who trade unregulated markets and investors conduct background checks of managers before investing.

https://encrypted-tbn0.google.com/images?q=tbn:ANd9GcTHXbSgM28cuPo3SGq8nRlfVIE7qAoAY2fhgo4Re0j9tbnEiRYthQIn a particularly interesting story that received national media attention, Chapter Five profiles the activities of Charles Hays, who doctored actual statements from legitimate Futures Commission Merchant Dorman Trading to perpetrate his fraud. Chapter Six tells the story of Daren Potter, who cleverly categorized investments in his program as "loans" and was ironically victim of a Ponzi scheme himself.

Many of the stories carry basic messages to which astute professional investors would likely know to avoid. This includes stories of investors being guaranteed profits and ponzi scam artists exhibiting overly strong performance through all market environments. If professional investors wished to skip the dramatic stories, they could travel right to page 53 where the "Investor Bill of Rights." This section advises investors to question managed futures fund investments that include significant fund lock-up clauses, do not properly explain obligations and fund expenses, require additional investment capital at a future point in time and have not appropriately disclosed all risks.

After the Bill of Rights, investors can continue right to the "Red Flags of Fraud" on page 57. While many of the red flags are basic, some of the more sophisticated flags include the fund's need for secrecy, fees and expenses are not clear, the investment has abnormal methods of accepting investments and conducting independent research on the fund is difficult.

Overall the book is strong, however, one might have wanted a discussion of the differences between a fund structure and direct account investment and perhaps questioning as to why managed futures funds require total secrecy while the direct account offers total transparency.

CFTC commission Chilton has a history in the commodities industry, having worked for agricultural hedging interests including representing family farmers for the National Farmers Union and the U.S. Department of Agriculture before being nominated as CFTC commissioner by President Bush the CFTC. With Mr. Chilton rumored to be in consideration to replace current CFTC Chairman Gary Gensler, the Ponzimonium book provides an interesting platform to usher in a new era of agency transparency and outreach.

Observing Mr. Chilton one gets the sense he has a lot to communicate beyond that standard party line. For the book "I had to tone it down from my normal style," Mr. Chilton confided. "Folks really objected to me calling Mr. Madoff a sleaze ball (which was omitted from the book)." This will likely be the first of many efforts by Mr. Chilton to take the reins of intelligent investor protections.

For additional information visit: www.CFTC.gov

Coming in the Next Uncorrelated Investing Show

Uncorrelated Investing Show is a video news and interview program broadcast over the Internet the middle of each month at www.Uncorrelated-Investing.com
The show covers the issues, personalities and hot topics in the industry of uncorrelated investing.
This edition covers:
The New Paranormal: Why Uncorrelated Investing Matters Now
MF Global Scandal Inside Information
Interview: Trend Following author Michael Covel
Insight into Performance Driver Behind Trend Following



 
This article was published in Opalesque Futures Intelligence.
Opalesque Futures Intelligence
Opalesque Futures Intelligence
Opalesque Futures Intelligence
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - George Soros puts $500m of his money on Bill Gross, Soros, Paulson backed Hispania Activos mulls Realia takeover, Ex-Credit Suisse trader’s hedge fund sees yen shorts as crowded, Hedge hunters double default-swaps as views split, Large hedge fund positions come under pressure, Vikram Pandit's fund picks 50% stake in JM Financial's realty lending arm for $87m[more]

    George Soros puts $500m of his money on Bill Gross From WSJ.com: Before Bill Gross was fully settled in at his new firm, Janus Capital Group Inc., he received an unlikely visit from the chief investment officer of famed investor George Soros ’s firm, according to a person familiar with t

  2. Legal - Hedge fund manager fights £8m tax tribunal ruling[more]

    From FT.com: A hedge fund manager who may have to repay £8m in tax is trying to overturn a tribunal ruling that found he had attempted to shelter millions in an avoidance scheme. Patrick Degorce, chief investment officer at Theleme Partners, lost a tax tribunal case last year. HM Revenue & Customs c

  3. Europe - Hedge funds face exit tax as Iceland central bank discusses plan[more]

    From Bloomberg.com: Hedge funds and other creditors with claims against Iceland’s failed banks face an exit tax as the island looks for ways to unwind capital controls without hurting the economy. The government targets having a plan it can present by year-end that would map out how Iceland will sca

  4. Opalesque Exclusive: Risk management emerges as a competitive focus area for hedge funds[more]

    Bailey McCann, Opalesque New York: Risk management has always been a core component of any trading strategy, as well as a critical part of business management. However, as macreconomic weakness persists, and alpha becomes increasingly hard to generate, risk management as emerged as a more promin

  5. Gross: Inflation is required to pay for prior inflation[more]

    Benedicte Gravrand, Opalesque Geneva: As inflation rises, every dollar will buy a smaller percentage of a good. While deflation will mean a decrease in the general price level of goods and services. These two economic conditions are both in the waiting room. The consensus would like the former to