"My Eyes Popped Out Of My Head": Ohio Woman Receives $284 Billion Electric Bill

The ‘Nightmare Before Christmas’ has nothing on this.

Due to a processing error made by her local power company, one Ohio woman discovered earlier this month – to her abject horror – that she owed Penelec, her power provider, $284 billion, a figure that’s larger than the combined national debts of Hungary and South Africa.

According to The Eerie Times News, Mary Horomanski discovered the error while she was checking her bill online. Initially, she wondered if the hefty charge was due to her Christmas decorations.

“My eyes just about popped out of my head,” said Horomanski, 58. “We had put up Christmas lights and I wondered if we had put them up wrong."

There was, of course, one small silver lining: According to her bill, Horomanski didn’t have to pay the entire $284,460,000 sum until November 2018. Her minimum payment for December was a relatively paltry $28,156. And Penelec hadn’t turned off her electricity – yet.

Fortunately for Horomanski, the issue was quickly resolved when she texted her son, who contacted the power company and told them about the bill. They confirmed that the sum was an error, and that Horomanski owed much, much less. Her online statement was quickly fixed to the correct amount: $284.46.

A spokesman for the power company said he doesn’t know how the error occurred but that it was obviously the result of somebody accidentally moving a decimal point nine digits to the right.

“I can’t recall ever seeing a bill for billions of dollars,” Durbin said. “We appreciate the customer’s willingness to reach out to us about the mistake."

The incident, Horomanski said, prompted her to ask for a different gift from her son this year.

“I told him I want a heart monitor,” she said.

And with that, the Horomanski’s Christmas was saved.  
 

SEC Wins Injunction Against ICO Organized By Financial Fraudster

The Securities and Exchange Commission is stepping up its long-overdue crackdown on shady initial coin offerings that are churning out suckers at a record clip with one simple promise: Invest in our coin and you, too, can receive an astronomical IRR just like your savvy cousin who bought a handful of bitcoins back in 2011 and decided to hold on for dear life.

In an enforcement action that, as far as we can tell, is the first of its kind anywhere, the SEC just won an emergency asset freeze to stop an initial coin offering that the agency said has defrauded investors by promising a 13-fold profit in less than a month.

While such an outrageous guarantee should immediately set alarm bells ringing in the minds of any experienced investor, bitcoin’s 1,000%-plus return so far this year has inspired many lazy would-be crypto millionaires to throw caution to the wind and approach every new ICO with a level of credulity that’s totally unjustified. But anybody who actually reads the “white papers” that many of these companies release will realize that they typically comprise hypertechnical gibberish designed to convince investors that there is no problem in the world today that can’t be solved with a blockchain and thousands of monetized tokens.

According to Bloomberg, the asset freeze was granted after the SEC sued Dominic Lacroix and his company PlexCorps in federal court in Brooklyn. The firm and Lacroix, described by the SEC as a recidivist securities-law violator (a status that’s not uncommon among so-called “entrepreneurs” in the massively fraudulent world of ICOs), have raised $15 million since August marketing and selling a product called PlexCoin.

The case is the first brought by a new SEC unit created in September to focus specifically on ICOs.

“This first Cyber Unit case hits all of the characteristics of a full-fledged cyber scam and is exactly the kind of misconduct the unit will be pursuing,” said Robert Cohen, head of the SEC’s Cyber Unit.

 

“We acted quickly to protect retail investors from this initial coin offering’s false promises."

According to the SEC, Lacroix and PlexCorps violated securities laws by failing to register the offering and not disclosing Lacroix’s involvement with probes by Canadian authorities, the SEC said. The agency also sued and froze the assets of Sabrina Paradis-Royer, described as Lacroix’s romantic partner. The suit seeks fines and disgorgement from Lacroix and Paradis-Royer, as well as a ban on their participation in offerings of digital securities.

The SEC fired its warning shot in July when its ruling on an investigation into the collapse of the DAO - a sort of proto-ICO that went bust after hackers stole $50 million worth of ethereum tokens (of course, the total value of the tokens stolen has massively inflated in the interveneing period) - officially declared ICOs to be securities that must be registered with the SEC. In August, the regulator warned investors to exercise extreme caution before investing in ICOs, warning that many are classic pump-and-dump schemes obscured by a new techno-veneer.

Even the most successful ICOs are on the verge of collapse. The 800 or so ICOs that have launched this year have raised nearly $4 billion. Yet the market has been astonishingly devoid of success stories.

Yesterday, we reported how frustrated investors in Tezos, which raised more than $230 million in an ICO over the summer, have filed a spate of class action lawsuits against the company alleging that its founders intentionally defrauded investors. The company, which had little more than a white paper to its name when it completed its offering, has yet to produce the digital tokens it promised investors.

Meanwhile, the ethereum and bitcoin that it accepted as payment during its crowdsale have appreciated massively in the intervening months.

But for those investors who still insist on invest in the ICO market - where founders fool investors with nonsensical business plans that they pass off as “too complicated” for the average layperson to grasp - one 16-year-old math whiz has created a product that will reportedly allow investors to invest in a “tranche” covering the entire ICO market.

As the press release explains, the answer is simple:

In a nutshell: We’re going to take a position in each ICO, then wrap those up into their own ICO and then you can buy tranches of that ICO depending on your “risk tolerance” i.e. how strong a person you are.

 

Basically, it’s all a question of how RICH YOU WANT TO BECOME. The bottom tranche is so safe that you can basically put your entire life savings in and earn a fat return.

The notion that diversification can help investors avoid losses in a massively fraudulent market is, of course, a canard. At the end of the day, it"ll be the investors - not the offering"s organizer - left holding the bag once the entire market goes to zero.
 

Trump Wins: Judge Denies Obama Holdover"s Suit Against Mulvaney Running CFPB

In a somewhat unsurprising decision, President Trump won a legal fight over who gets to run the Consumer Financial Protection Bureau (at least for now).

As Bloomberg reports, Trump"s budget director Mick Mulvaney can remain as temporary head of the agency, a federal judge ruled in rejecting a request to block the move fromLeandra English, who was named to the role by the departing director.

U.S. District Judge Timothy Kelly in Washington rebuffed English, who sued to Nov. 26, contending she is entitled to the provisional post.

Kelly, who has been on the bench since only September, is a Trump nominee who previously worked for Senate Judiciary Committee Chairman Chuck Grassley, an Iowa Republican, and also served as a federal prosecutor.

The judge’s ruling came after hearing from both sides Tuesday.

 

A day earlier, attorneys for English and the Justice Department had spent about 40 minutes trying to persuade him.

 

Joining the fight on English’s behalf were about two dozen current and former members of Congress who told Kelly the president’s choice of his White House budget director to temporarily helm the CFPB threatened the agency’s ability to operate independently as designed.

 

Among those who joined in that filing, former U.S. Representative Barney Frank, a Massachusetts Democrat who co-authored the Dodd-Frank legislation with former Connecticut Senator Christopher Dodd.

As The Hill reports, the ruling clears the way for Mulvaney to run the CFPB until a permanent director is sworn in or English successfully appeals the decision.

Trump 1 - 0 Resistance.

SEC Cracks Down On "Initial Coin Offerings": Concludes Tokens Are Subject To Securities Laws

In groundbreaking news for the blockchain community, moments ago the SEC issued a press release, referencing an investor bulletin on Initial Coin Offerings, which concluded that DAO Tokens, a Digital Asset, are securities for regulatory purposes, and cautioned that US Securities law "may" apply to offers, sales and trading of interested in virtual organization, targeting the increasingly more popular Initial Coin Offerings.

Capital raising through blockchain requires compliance with federal securities laws https://t.co/IjOxjoVdfK

— SEC Enforcement (@SEC_Enforcement) July 25, 2017

As a result of this change of treatment, those who use ICOs to sell tokens, which as a reminder have now surpassed over $1 billion in net proceeds, will have to register the tokens as securities, those participating in unregistered offerings may be liable for violations of the securities laws, and that the purpose of the registration "is to ensure that investors are sold investments that include all the proper disclosures and are subject to regulatory scrutiny for investors" protection."

In a press release issued on Tuesday afternoon, the SEC said it had issued an investigative report "cautioning market participants that offers and sales of digital assets by "virtual" organizations are subject to the requirements of the federal securities laws." Such offers and sales, conducted by organizations using distributed ledger or blockchain technology, have been referred to, among other things, as "Initial Coin Offerings" or "Token Sales." In its first official regulatory intervention of ICOs, the SEC said that "whether a particular investment transaction involves the offer or sale of a security – regardless of the terminology or technology used – will depend on the facts and circumstances, including the economic realities of the transaction."

Some more details from the report, highlights ours:

The SEC"s Report of Investigation found that tokens offered and sold by a "virtual" organization known as "The DAO" were securities and therefore subject to the federal securities laws. The Report confirms that issuers of distributed ledger or blockchain technology-based securities must register offers and sales of such securities unless a valid exemption applies. Those participating in unregistered offerings also may be liable for violations of the securities laws. Additionally, securities exchanges providing for trading in these securities must register unless they are exempt. The purpose of the registration provisions of the federal securities laws is to ensure that investors are sold investments that include all the proper disclosures and are subject to regulatory scrutiny for investors" protection.

"The SEC is studying the effects of distributed ledger and other innovative technologies and encourages market participants to engage with us," said SEC Chairman Jay Clayton. "We seek to foster innovative and beneficial ways to raise capital, while ensuring – first and foremost – that investors and our markets are protected."

"Investors need the essential facts behind any investment opportunity so they can make fully informed decisions, and today"s Report confirms that sponsors of offerings conducted through the use of distributed ledger or blockchain technology must comply with the securities laws," said William Hinman, Director of the Division of Corporation Finance.

The SEC"s Report stems from an inquiry that the agency’s Enforcement Division launched into whether The DAO and associated entities and individuals violated federal securities laws with unregistered offers and sales of DAO Tokens in exchange for "Ether," a virtual currency. The DAO has been described as a "crowdfunding contract" but it would not have met the requirements of the Regulation Crowdfunding exemption because, among other things, it was not a broker-dealer or a funding portal registered with the SEC and the Financial Industry Regulatory Authority.

"The innovative technology behind these virtual transactions does not exempt securities offerings and trading platforms from the regulatory framework designed to protect investors and the integrity of the markets," said Stephanie Avakian, Co-Director of the SEC"s Enforcement Division. 

Steven Peikin, Co-Director of the Enforcement Division added, "As the evolution of technology continues to influence how businesses operate and raise capital, market participants must remain cognizant of the application of the federal securities laws."

In light of the facts and circumstances, the agency has decided not to bring charges in this instance, or make findings of violations in the Report, but rather to caution the industry and market participants:  the federal securities laws apply to those who offer and sell securities in the United States, regardless whether the issuing entity is a traditional company or a decentralized autonomous organization, regardless whether those securities are purchased using U.S. dollars or virtual currencies, and regardless whether they are distributed in certificated form or through distributed ledger technology.

The SEC"s Office of Investor Education and Advocacy today issued an investor bulletin educating investors about ICOs. As discussed in the Report, virtual coins or tokens may be securities and subject to the federal securities laws. The federal securities laws provide disclosure requirements and other important protections of which investors should be aware. In addition, the bulletin reminds investors of red flags of investment fraud, and that new technologies may be used to perpetrate investment schemes that may not comply with the federal securities laws.

The SEC"s investigation in this matter was conducted in the New York office by members of the SEC"s Distributed Ledger Technology Working Group (DLTWG) -- Pamela Sawhney, Daphna A. Waxman, and Valerie A. Szczepanik, who heads the DLTWG -- with assistance from others in the agency"s Divisions of Corporation Finance, Trading and Markets, and Investment Management. The investigation was supervised by Lara Shalov Mehraban.

The SEC"s decision to "register" ICOs may have a similar effect to its denial to allow a bitcoin ETF, which initially sent the price of bitcoin tumbling but then promptly reversed, and pushed it back to all time highs.

While the SEC"s intention to regulate ICOs will probably have an initial chilling effect on the market as it will make issuance of ICOs more difficult, it will also prove to be a blessing in disguise as it not only validates the blockchain capital-raising mechanism, allowing the entrance of major banks to use it as a fintech alternative to IPOs, but considering some of the utterly idiotic and doomed to failure ICOs that have been observed in recent weeks, curb the proliferation of ponzi, pyramid and other get rich quick schemes which in many cases are beyond borderline criminal.

It will also also reduce the risk of drastic losses once the initial euphoria period passes, and only the more serious and credible coin offerings remain as a result, something which ultimately will benefit the blockchain in general, and ethereum in particular.

Ultimately regulation of ICO will greenlight the eventual use of cryptos as eligible collateral in capital markets transactions, something Bank of America said in a report earlier today is critical to truly unleash the crypto community to its next evolutionary step in replacing fiat.

Whether cryptocoin enthusiasts like it or not, regulation (and enforcement) will lead to a sturdier blockchain ecosystem, and while the potential for dramatic upward moves will be limited, so will the likelihood of catastrophic losses.

CFPB Makes It Easier For Customers To Sue Banks

The Consumer Financial Protection Bureau just made it easier for ordinary citizens to sue banks by restricting how they can use mandatory arbitration to block class-action lawsuits, according to Bloomberg. But the decision – inspired by a 2015 investigative series in the New York Times about how US companies, particularly credit card companies and payday lenders, abuse the practice – likely won’t stay on the books for long. As the LA Times writes:

It"s all but certain that Republican lawmakers in control of the House and Senate will move quickly to overturn the rule as part of their ongoing efforts to cripple the consumer-watchdog agency and create a more business-friendly regulatory landscape.”

Clauses requiring arbitration to settle disputes are inserted routinely in contracts for credit cards, payday loans and other financial products. They typically prevent consumers from filing lawsuits or banding together in class actions.

"Arbitration clauses in contracts for products like bank accounts and credit cards make it nearly impossible for people to take companies to court when things go wrong," CFPB Director Richard Cordray said in a statement.

“These clauses allow companies to avoid accountability by blocking group lawsuits and forcing people to go it alone or give up. Our new rule will stop companies from sidestepping the courts and ensure that people who are harmed together can take action together.”

From the time they formally receive the ruling, lawmakers have 60 legislative days to overturn the bureau’s decision. Republicans have been using the Congressional Review Act, a little-known provision, to undo more than a dozen Obama-era regulations during the closing days of his presidency, including the CFPB’s plans to implement tougher standards for prepaid debit cards.

“As a matter of principle, policy and process, this anti-consumer rule should be thoroughly rejected by Congress,” Representative Jeb Hensarling, the Texas Republican who leads the House Financial Services Committee, said in a statement.

Congress isn’t the only body that’s skeptical of the ruling: In an unusual move, the head of a key banking regulator wrote to Cordray to raise concerns about it. Keith Noreika, the acting Comptroller of the Currency, asked that the CFPB share data used to develop its arbitration rule, according to a letter dated Monday that was obtained by Bloomberg.

“We would like to work with you and your staff to address the potential safety and soundness implications of the CFPB’s arbitration proposal,” Noreika said in the letter. “That is why I am requesting the CFPB share its data.”

Noreika cited a section of the Dodd-Frank Act that gives the Financial Stability Oversight Council - a panel of regulators headed by the Treasury secretary - power to set aside any CFPB rule that can be shown to put the safety of the wider financial system at risk.

Our new rule ensures that groups of people harmed by the same financial products can take action together. pic.twitter.com/rXYzHz67ea

— consumerfinance.gov (@CFPB) July 10, 2017

However, studying the fairness of arbitration clauses appears to be well within the bureau’s remit: Dodd-Frank says the CFPB "may prohibit or impose conditions or limitations on the use" of arbitration clauses if it determines that restricting such provisions "is in the public interest and for the protection of consumers,” according to the LA Times.

During its study, the CFPB found that hundreds of millions of contracts include arbitration provisions and that companies have used the clauses to keep fights out of court almost two-thirds of the time. Very few consumers even consider bringing individual actions against financial-service providers in court or in arbitration.

Despite the rule’s near-certain erasure, Christine Hines, legislative director for the National Assn. of Consumer Advocates, told the LA Times that the CFPB isn’t thumbing its nose at Republican lawmakers who have insisted for years that the agency is a rabid regulatory pit bull in need of either a very short leash or a trip to a farm.

“The agency has to continue doing its job,” she said, “even though there are very anti-consumer people in power.”

Other consumer advocates echoed that sentiment.

“The rule will help to combat the culture of companies profiting from charging illegal fees and committing other crimes against their customers,” said Rohit Chopra, senior fellow at the Consumer Federation of America.

Said Lisa Donner, executive director of Americans for Financial Reform: “The consumer agency’s rule will stop Wall Street and predatory lenders from ripping people off with impunity, and make markets fairer and safer for ordinary Americans.”

The new rule will cover new agreements for products such as credit cards, auto loans, credit reports and even mobile phone services that provide third-party billing. Companies can still include arbitration clauses in contracts, but they must state that those can’t be used to stop individual consumers from joining class-action cases.

According to Bloomberg, it is also possible that industry groups will sue to overturn the CFPB rule. Groups including the US Chamber of Commerce have said arbitration is a valuable tool to prevent frivolous, expensive lawsuits that often don’t do much to benefit borrowers. Meanwhile, consumer advocates say restricting arbitration clauses will deter bad actors and force companies to reconsider certain activities because consumers will be more inclined to sue.

Gold, FX Lawsuits May Have Less than 50% Chance of Winning- Vince Lanci

Writing from the road... 

Author Vince Lanci on marketslant.com

We have written many times about manipulation in this column. We seek justice and fairness in the markets that we continue to consider "free". First some thoughts on the trail of trader-speak I"ve been pouring over recently.

The takeaway is this: getting over the circumstantial evidentiary bar to be permitted to get to discovery was a big deal. Rosa Abrantes has done much to get these cases as far as she has. But now, forensic work at the operational level is needed. And it just is not easy to prove the cases. Now, even with chats and trade logs, the facts can almost never be known.

Within the constraints of our legal system, it is much harder to prove manipulation then the plaintiffs would have you think. This refers to the precious metals cases, the current FX cases, and the pending treasury cases.

We are now at the discovery level, thousands of documents with chats and messages back-and-forth between traders are available for the plaintiffs to review. This is great. But can the lawyers understand intent from written words?

He was just kidding! Can you prove otherwise?

PROVING INTENT IS NOT EASY

This is because the facts needed to prove "intent" are in the traders heads. And without intent you cannot win.

In the three legged stool that is the legal system, intent is hardest leg to establish. I think "means, and opportunity" are the other 2.

Trader conversations are not prose, to say the least. It is near impossible without inflection and confirmation in chats to determine, or differentiate sarcasm from sincerity. How can one divine intent from a chat where a trader alternately asserts he"s infallibly correct in an opinion, and then laughs at himself for having such an outrageous opinion? No, the burden of proof that the plaintiffs must satisfy is very difficult in this circumstance. 

Note my own spelling in these very articles that the Soren K group posts. My own trading messages were difficult to translate let alone divine my intent. Frequently brokers would object to my horrible typing. I would respond with

"My misspelling is protection against your execution error. If you mess up I can always blame you for not clarifying." I would then follow that with a LOL.

Was I joking? How can you tell? Frankly, I was truly sloppy and not detail oroented. But it also served to me as a hedge against what sometimes was poor service. I insisted on clarification. This was one way I got it.

PERSONAL EXPERIENCE SAYS TRUTH WITHOUT FACTS LOSES

In one instance I was subject to an eight hour deposition regarding a manipulation case in natural gas options. It Involved a major bank in Canada, a major energy exchange, a multibillion-dollar hedge fund, a new electronic trading platform, and traders who executed on that platform of which I was one.

I was a material witness and wasn"t a party to either side of the prosecution. But I ended up essentially being an expert witness because of the questions asked by one excellent attorney.

It was clear that they were not able to divine intent at the trading and forensic level of other participants in that scandal. They sought evidence of manipulation between the hedge fund and a bank employee. There was none to be found in the trades, or chats as damning as they may have been in appearance.

It was that day that I learned in the legal world, conditional probability and narrative do not hold up when there are no facts to back it up. TRADERS USE CONDITIONAL PROBABILITIES TO MAKE DECISIONS IN UNCERTAINTY. JUDGES RISK NOTHING. IT ALL COMES DOWN TO FACTS. WITHOUT FACTS, A CASE GETS SETTLED ON THE COURT STEPS. And the facts proving intent were in the peoples" heads. Short of a download of their brains the cases cannot be won easily.

It was made obvious to me later by my own attorney that the focus should"ve been on something entirely different then the line of questioning being asked.

His advice was meant to let me know that if something was going on it would"ve been impossible for them to divine it from trying to figure out what traders are doing and why they"re doing it.

The plaintiffs actually settled days later in part most likely because of the information given during my testimony. Ironically months before my deposition, one of the law firms" "expert consultants tried to hire me for their case. They actually called me seeking me as an expert witness.

My response was "I am qualified to do this, but if you check your list I"m a material witness in the case as I participated in the trades." Based on their discovery interview on me, I now know that case would have ended differently had they been able  to translate, correlate and corroborate trades to chats.

HFT IS EASIER TO PROVE

It is actually easier to prove intent in HFT cases. And that is because the programming used is essentially a trader"s intent in code. Programmers write down exactly what the trader wants to do!

But that won"t happen as long as it is run by bigger players. Mike Coscia was an impediment to other bigger form HFT rigging. Ask NANEX"s Eric Hunsader. Once you get a hold of a firm"s programmer, intent is easily proven. This is why you will increasinglyhear " The programmer is privy to proprietary secrets and cannot be deposed. Secrets as in INTENT TO SPOOF"?

CHATS DO NOT PROVE INTENT

Reviewing some of the Gold and FX conversations, even in context of the actions, is not such an easy proof of manipulation as the prosecutors would have you believe. It seems to me that the plaintiffs have a less than 50/50 chance of conviction and will settle on the court steps if they scare the defendants sufficiently.

Deutsche bank in our opinion was a fluke. A fluke because they had much bigger fish to fry with the DOJ. Why else would a bank walk away from its London precious metals vault only two years after opening?

LOST IN TRANSLATION

The Gold, Silver, Fx and now the Treasury manipulation cases are not easily proven using facts. And our legal system just does not burn witches without proof anymore. Having been a material and expert witness in these type things, the accusers are not usually prepared for the arcane speech traders use.

Just as when a lawyer says "res ipse loquitor", a trader can say, "it"s going down, I guarantee it! Lol." And no one an KNOW what he really intended. How can the plaintiff prove that the LOL is him not mocking himself?

Often times it is self recognition of his own failure, hubris, and ego. This, as opposed to him laughing at some unsuspecting victim. So, given this, how can the plaintiffs pretend to know what goes on in the traders mind? There is lexicon, trader sarcasm, wishful thinking as opposed to willful manipulation, and the old adage that "no one is bigger than the market."

FACTOIDS ARE NOT FACTS

Point here is that to win, all the defense has to do is make it clear that no one can know what the words written were intended to convey. In a legal system that needs facts, and where those facts are in the heads of the chat writers, it is not a slam dunk to get the evidence recognized as fact and not interpretation of what we feel a person may or may not have intended.

Lacking expert forensic preparation that links and correlates the chats with time stamped subsequent actions, all the plaintiffs will likely get is conjecture and muddied waters.  Facts will not be proven we bet. Not without narrative and contradictions found in discovery process. A ton of circumstantial material will not substitute for a real fact.

And unless litigators can prove contradiction of deposed traders on the stand between what they wrote, their actions, and what they say in discovery, the case is not easily won. Read what Matt Levine has to say on the topic below. 

Vince Lanci.

Vlanci@echobay.com

Twitter @vlancipictures

Marketslant Articles

 

Trader chats.

by Matt Levine.

My basic theory of post-crisis financial scandals is that the main illegal thing that traders do is send each other dumb emails and chat messages. So many of these scandals are hard to describe in objective terms.

The Libor scandal was about submitting fake numbers in Libor surveys, but even non-scandalous Libor submissions were pretty fake, so the only way to distinguish the bad fakes from the good ones was by finding chat messages saying things like "LOWER MATE LOWER !!" What was scandalous in the foreign-exchange-fixing scandal was that banks traded ahead of customer orders, but that was also legal; what was illegal was the dumb chats between those banks sharing customer information. The chats and emails are evidence of substantive illegality -- illegal collusion, manipulation, etc. -- but also display an attitude.

If they were written in dull legalese, they would have created much less of a reaction; regulators might not even have noticed the problem. But they weren"t; they were filled with obscenity, slang, misspelling, and promises of Champagne, all of which tend to enrage prosecutors and juries and the public.

Anyway I enjoyed this story about the irreducible atomic unit of dumb trader chat: A five-word message to a rival banker was enough to cost former Citigroup Inc. trader David Madaras his job as the bank fought to appease regulators probing the foreign-exchange scandal engulfing the industry.

Citigroup’s Timothy Gately disclosed the message on the first day of Madaras’s employment lawsuit in London Tuesday. The executive said the April 2011 chat constituted gross misconduct and firing Madaras was the only appropriate sanction. "he’s a seller/fking a," Madaras told a rival trader who had just disclosed the identity of a client, Gately said in a filing prepared ahead of the hearing.

That chatroom message "validated an external trader’s disclosure of a client name," Gately said in the filing. The first three words -- "he"s a seller" -- are substantive misconduct, disclosing a client"s order to a competitor, and enough to get you fired in an atmosphere of heavy scrutiny of that sort of thing.

The next two -- "fking a" -- are substantively superfluous, but you can"t have a scandalous trader chat without obscenity and misspelling. You can"t imagine a trader actually being fired for typing "he"s a seller," but of course one was fired for typing "he"s a seller/fking a." This is partly a matter of psychological makeup -- how could the traders resist cursing? -- but it might also be a matter of technology. What search, what flags, brought that chat to the executives" attention? Does compliance monitor every time traders type "he"s a seller"? (Presumably they type that a lot!) Or is there a search for "fking," and other variant spellings, that triggers review?

Read more by Soren K.Group

Secret Recording Implicates Bank of England In Libor Rigging

While it may seem like yesterday, it was nearly five years ago that the Libor scandal first broke, and with it brought scandalous suggestions that none other than the Bank of England was implicated.

As we first reported in July 2012, according to Barclays then CEO Bob Diamond, it was high level individuals at the BOE who may (or may not) have been aware that Libor had been "manipulated" and were (or were not) also active in the setting process:

• BARCLAYS SAYS BANK OF ENGLAND CALLED ON OCT. 29, 2008 ON LIBOR


• BARCLAYS SAYS DIAMOND MADE NOTE OF CALL; RECEIVED CALL FROM PAUL TUCKER


• BARCLAYS SAYS TUCKER SAID `CERTAIN" BARCLAYS DIDN"T NEED ADVICE; SAID LIBOR DIDN"T ALWAYS NEED TO BE SO HIGH

And yet, concerned about how deep the rabbit hole would go if a central banker was implicated, Diamond tried to cover it up:

• BARCLAYS SAYS DIAMOND DIDN"T BELIEVE HE HAD GOT INSTRUCTION

Even as:

• BARCLAYS SAYS DEL MISSIER CONCLUDED INSTRUCTION HAD BEEN GIVEN; TOLD RATE SETTERS TO LOWER RATES

The note in question was represented below:

Needless to say, when it comes to the central bank nothing happened: a few BOE personnel were reassigned, some quietly lost their jobs, and nobody was prosecuted or charged. Certainly, nobody went to prison.

* * *

Fast forward nearly five years later, when the Libor scandal may have reemerged after a secret recording that implicates the Bank of England in Libor rigging has been uncovered by BBC Panorama.

According to the BBC, the 2008 recording adds to evidence the central bank repeatedly pressured commercial banks during the financial crisis to push their Libor rates down, just as suggested by Bob Diamond in 2012.

The recording calls into question evidence given in 2012 to the Treasury select committee by former Barclays boss Bob Diamond and Paul Tucker, the man who went on to become the deputy governor of the Bank of England. In the recording, a senior Barclays manager, Mark Dearlove, instructs Libor submitter Peter Johnson, to lower his Libor rates.

Dearlove tells him: "The bottom line is you"re going to absolutely hate this... but we"ve had some very serious pressure from the UK government and the Bank of England about pushing our Libors lower." To which Johnson objects, saying that this would mean breaking the rules for setting Libor, which required him to put in rates based only on the cost of borrowing cash.

Mr Johnson says: "So I"ll push them below a realistic level of where I think I can get money?"

His boss Mr Dearlove replies: "The fact of the matter is we"ve got the Bank of England, all sorts of people involved in the whole thing... I am as reluctant as you are... these guys have just turned around and said just do it."

The phone call between Mr Dearlove and Mr Johnson took place on 29 October 2008 the BBC notes, the same day that Tucker, who was at that time an executive director of the Bank of England, phoned Barclays boss Diamond. Barclays" Libor rate was discussed.

Diamond and Tucker were called to give evidence before the Treasury select committee in 2012. Both said that they had only recently become aware of lowballing, despite Diamond"s abovementioned tacit admission, which he then tried to cover up.

In its report, Panorama says it played the October 2008 recording to Chris Philp MP, who sits on the Treasury committee.

He told the programme: "It sounds to me like those people giving evidence, particularly Bob Diamond and Paul Tucker were misleading parliament, that is a contempt of parliament, it"s a very serious matter and I think we need to urgently summon those individuals back before parliament to explain why it is they appear to have misled MPs. It"s extremely serious."

Responding to the recording, Diamond told the BBC: "I never misled parliament and… I stand by everything I have said previously." Tucker did not respond to our questions. Peter Johnson, the Barclays Libor submitter, was jailed last summer after pleading guilty to accepting trader requests to manipulate Libor.

Two traders who made requests for Mr Johnson to move Libor up or down, Jay Merchant and Alex Pabon, were found guilty last June of conspiracy to defraud along with another submitter, Jonathan Mathew.

However, the jury could not reach a verdict on two other traders then on trial, Ryan Reich and Stelios Contogoulas. The Serious Fraud Office requested a retrial which concluded last week. Both Mr Reich and Mr Contogoulas were unanimously acquitted. Panorama also played Contogoulas the October 2008 recording. He said he believed that if it had been played during the criminal trials it might have affected the outcomes.

He said: "That"s the thing, you know in these trials that we went through they separated everything, separated trading requests and lowballing. So anything that has to do with this they don"t go in. So you"re asking me do I think that if all this was in would it make a difference? Probably, is the answer."

* * *

Another notable "criminal" to emerge from the Libor scandal was Tom Hayes, the UBS and Citi-based Libor manipulating protagonist of the recent book "The Spider Network", and who was arguably at the center of the prosection"s LIbor case. He has repeatedly claimed that the real culprits are not those - like him - who executed the Libor rigging, but the ones at the very top who have the instructions to do so.

Like, as the case may be, the Bank of England.

Yet while some junior people went to prison, nobody in the corner office, and certainly nobody at the BOE has faced any criminal consequences from their actions.

The BBC adds that the Serious Fraud Office, which brought the Barclays prosecutions told Panorama that evidence of lowballing, was provided to the recording. They also say they are still investigating lowballing and that they follow the evidence "as high as it goes and aim to charge the most senior people wherever there is a realistic prospect of conviction".

The Bank of England said: "Libor and other global benchmarks were not regulated in the UK or elsewhere during the period in question.... Nonetheless, the Bank of England has been assisting the SFO"s criminal investigations into Libor manipulation by employees at commercial banks and brokers by providing, on a voluntary basis, documents and records requested by the SFO."

Ironically, it is precisely that it was unregulated that may have given the Bank of England the green light to assume it can manipulate it with impunity.

It remains to be seen if, nearly a decade after the Libor manipulation took place, any central banker will go to prison over it.

How Antonio Lee Snuck A Fake $3.6 Trillion Acquisition Past The SEC

Antonio Lee, "an American entrepreneur" and "world renowned artist," can be described as almost anything except humble..."scam artist" fits pretty well.  According to his official bio, Lee began his career in the cosmetology field, "as a barber", but quickly decided he was better suited to raise a $1 trillion "art investment fund."

Antonio Lee (born Antonio Luis Winters; July 14, 1984) is an American entrepreneur, world renowned artist, and YouTube celebrity specializing in acrylic painting. He is well known for his work in the field of Scientific and Performance Art. Lee is the grandson of renowned African-American artist, Annie Lee. Lee credits inspiration to Pablo Picasso, Leonardo Da Vinci, Annie Lee, Jean Michel Basquiat and Damien Hirst.

For the early part of Lee’s professional life he worked in the field of real estate and cosmetology, as a barber. However, he was severely injured during a case of police brutality. After much rehabilitation therapy Antonio Lee was able to regain mobility, but he is now limited in his range of motion as well as tolerance for sitting and standing.  Lee is the father of three girls Malia Lee, Naima Lee, & Ziya Lee. He married in 2011, however, due to marital hardships, he and his wife divorced in 2013. This injury took a toll on Lee, causing him to suffer from major depressive episodes.

In 2013, Lee founded YNoFace Holdings, a Wisconsin company, the first art investment fund created by an artist, that has offered the first issuer- issued private offering under the Jobs Act.

If fact, for those among our readership who would like more information, here is brief overview of the "YNOFACE Holdings" art fund that "acquires, markets, and holds original art as a capital appreciation investment based off the fundamental metrics"...seems solid.

YNOFACE Holdings Inc. acquires, markets, and holds original art as a capital appreciation investment based off the fundamental metrics. We are the first investment art fund created by an artist, world renowned scientific artist Antonio Lee. In addition we are made up of 17 independent contractors and growing. We will upload and share our 41 city global art tour and performances right here on YouTube for your enjoyment! We will showcase our art and the art of the world from a different perspective! Enjoying and Appreciating All That Exists!

And while all of the above from YNOFACE Holdings would seem odd enough, things took a turn for the truly bizarre recently when Lee decided to post an official 8-K with the Securities and Exchange Commission announcing the sale of his art fund to Google for $3.6 trillion, making him easily the wealthiest man in the world.  Per Bloomberg:

A few hours after the New York market close on Feb. 1, an obscure Chicago artist by the name of Antonio Lee told the world he had become the world’s richest man.

The 32-year-old painter said Google’s parent, Alphabet Inc., had bought his art company in exchange for a chunk of stock that made him wealthier than Microsoft Corp. co-founder Bill Gates, Berkshire Hathaway Inc.’s Warren Buffett and Amazon.com Inc.’s Jeff Bezos -- combined.

Of course, none of it was true. Yet, on that day, Lee managed to issue his fabricated report in the most authoritative of places: The U.S. Securities and Exchange Commission’s Edgar database -- the foundation of hundreds of billions of dollars in financial transactions each day.

All of which, of course, simply serves as a reminder that pretty much anyone, including a former barber turned trillionaire art collector from Chicago, can dupe the SEC.

For more than three decades, the SEC has accepted online submissions of regulatory filings -- basically, no questions asked. As many as 800,000 forms are filed each year, or about 3,000 per weekday. But, in a little known vulnerability at the heart of American capitalism, the government doesn’t vet them, and rarely even takes down those known to be shams.

“The SEC can’t stop them,” said Lawrence West, a former SEC associate enforcement director. “They can only punish the filer afterward and remove the filing from the system."

After the fraudulent Avon filing, U.S. Senator Chuck Grassley, the Iowa Republican and former chairman of the Finance Committee, told the SEC it must review its posting standards.

“This pattern of fraudulent conduct is troubling, especially in light of the relative ease in which a fake posting can be made,” Grassley wrote in a letter to the agency.

In response, Mary Jo White, who then chaired the SEC, said it wouldn’t be feasible to check information. She noted that there were on average 125 first-time filers daily in 2014, and the agency was studying the strengthening of its authentication process.

In fact, as Reuters pointed out last fall, Lee"s February filing with the SEC wasn"t even his first act of securities fraud as it was preceded by another fraudulent filing in which he purported to have acquired a modest $88 billion stake in BAML.

In the latest apparent spoof on a U.S. securities regulator"s online filing system, a Chicago-area artist with a fondness for inspirational quotes claimed to have acquired about $88 billion worth of Bank of America Corp shares on Wednesday.

While the SEC did not respond to a request for comment and Bank of America declined to comment, securities experts said there was no doubt the filing was a hoax.

In it, a company called YNOFACE Holdings Inc purportedly run by Antonio Lee said it had acquired 798.4 million Bank of America shares in an exchange on Aug. 15, and purchased another 4.2 billion common shares and 100 million preferred shares on Sept. 22.

The common shares alone would represent nearly half the bank"s total market cap. Bank of America"s largest shareholder, The Vanguard Group, has roughly 610 million shares, a stake of less than 6 percent.

In an earlier filing, YNOFACE said it had implausibly raised over $1 trillion for an art fund.

So, caveat lector -- let the reader beware.