Friday, December 12, 2008

Top Broker Accused of $50 Billion Fraud

Note: This link is only good for 7 days.

Somehow, despite numerous warning signs and many complaints this famed stockbroker got away with a Ponzi scheme of mammoth proportions. The recent turmoil in the markets and massive redemptions finally broke this scheme and now the operator is about to face the music after being turned in by his sons (who are surely attempting to get out of criminal prosecution themselves).

How do you protect yourself from these types of scams?

First, don't ever write a check or send money directly to the company servicing you. For example, the only check I would ask a client to write to me and my company (Meridian Wealth Management) would be for fees relating to my service. I would never ask you to send your money directly to Meridian Wealth Management. If you are working with a broker or an advisor and have sent your money directly to them as opposed to sending it to your own account at a major brokerage custodian like Schwab, Fidelity, TD Ameritrade or others, you should start investigating right away. Your money could be at risk.

You should receive monthly or at least quarterly statements FROM a reputable broker/dealer like the one's mentioned above - not from the company itself. While my company provides quarterly consolidated statements they are in addition to, not a replacement of the statements from the custodian (Fidelity, Ameritrade and TIAA).

Lastly, check to make sure your advisor is registered as either an Investment Advisor or a Registered Representative. You can start at

Ronald Reagan used to say "Trust, but Verify". This is good advice and I encourage you to do it, even if you're a client of mine.

You should be able to log in to your accounts online at the institution to see your accounts. If you can do all the above you should be safe from a ponzi scheme, though of course not from regular losses in the stock market.

Scott Dauenhauer CFP, MSFP, AIF