Posted in: SEC | Greedy Brokers |
It is difficult to understand the motivation of a Ponzi schemer. The Minneapolis Star-Tribune have dug deep into the life of alleged fraudster Trevor Cook, who is sitting in federal jail, likely facing a fate similar to that of Bernie Madoff and Allen Stanford.
Cook’s lust of money apparently fed his many addictions. In the Star-Tribune article, which can be viewed here, friends and co-workers recall Cook spending thousands on alcohol per week, holding extravagant parties with exotic dancers, and holding nearly $4 million in gambling debts.
When the SEC filed suit against Cook last November, a US District Court Judge ordered the Minneapolis-based money manager to surrender his assets, including money overseas. This included $27 million in bank assets, $675,000 in cash, many luxury automobiles - including a custom Audi capable of 200 miles per hour - and even a submarine.
Oh yes, a submarine. According to a former colleague, Cook purchased a two-person submarine for $40,000 on Ebay to help him navigate the waters near his recently-purchased island property in Canada. Cook later learned the lake water was not sub-friendly.
To get his money, Cook raised $190 million from investors, promising them investments in foreign currency with promised returns of more than 10 percent. The SEC alleges Cook instead deposited the money in shell accounts, lost $40 million in risky foreign currency trading, and went on a spending spree with the remaining $40 million.
Instead of complying with the court order, Cook liquidated additional US assets he had not disclosed to the SEC, and proceeded to hide the money overseas. Upon learning this news, Federal Judge Michael J. Davis did not hesitate to hold Cook in contempt of court last month.
Cook will remain in federal jail until he produces the money, which can hopefully be returned to investors of his alleged scheme.
Some investors have ever been victimized by someone like Cook, and they wondered why they were victimized-or even worse, they blame themselves. Ponzi scheme investors are not fools, but rather are deceived by successful who have mastered deception.
To gain access to investors, Cook partnered with Patrick “Pat” Kiley, a syndicated radio host, to pitch their investment plan to listeners of over 200 radio stations. By all accounts, Cook had a polished and charismatic exterior, and conveyed success.
The Securities and Exchange Commission will typically pursue the worst-offending stockbrokers in civil court. Arbitrators are not judges, and while civil cases can only lead to fines and not jail time, federal regulators use court orders and subpoenas to mount large cases against Ponzi schemers Madoff and Stanford, among others.
Cook is facing multiple lawsuits against former investors. Last summer, nine Ohioans filed a federal lawsuit against Cook alleging he and his associates would not return nearly $5 million in the supposedly liquid investment.
But it is the SEC’s civil case that has Cook sitting in jail. Cook responded to Judge Davis’ decision by saying the jailing was “punitive.” If he returned his assets, he would be freed pending criminal charges. But he still refuses, perhaps because of anger and stubbornness, or greed.
