Alexander Efros, MBA, CPA, Discusses The Allen Stanford Fraud Case — Transcript

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1. 0:07this is article in new york times
2. 0:10it says that the sec files suit to
3. 0:12recoup losses in the stanford case
4. 0:15now for those not familiar
5. 0:17with alan stanford fraud case
6. 0:20he's basically awaiting trial on 14
7. 0:22criminal counts related to the
8. 0:24investment business
9. 0:25he basically had a
10. 0:27enormous ponzi scheme
11. 0:30and he used the
12. 0:31proceeds from 21 500 customers to
13. 0:34finance a lavish lifestyle did he ever
14. 0:37and he managed more than seven billion
15. 0:39dollars of customer assets
16. 0:42so it's pretty big fraud so what's going
17. 0:44on here is cipic
18. 0:46is
19. 0:47kind of like the fdic of the investment
20. 0:49world it's supposed to protect you if
21. 0:51your custodial bank becomes insolvent
22. 0:54a lot of people rely on fdic they hear
23. 0:57the word insurance and they feel great
24. 0:58about having their money in a certain
25. 1:01investment
26. 1:02or having their money on deposit
27. 1:04makes them feel secure makes them feel
28. 1:06that whatever happens that they're going
29. 1:08to be protected and this is one of the
30. 1:10big reasons that customers choose to
31. 1:12have their money on deposit or to have
32. 1:14certain cds it's because of that fdic
33. 1:16protection
34. 1:18now what's going on here is that cipic
35. 1:21which is
36. 1:22meant to protect investors it's called
37. 1:24the investment protection corporation is
38. 1:27basically saying no we're not paying
39. 1:29we're not going to pay
40. 1:31this is basically a nightmare if you're
41. 1:33one of the investors in the stanford
42. 1:36case
43. 1:37and you're out all of your money
44. 1:39and you said all right well at least
45. 1:40these securities that i bought were
46. 1:42insured by cipic you know at least i can
47. 1:45rest easy well it's not that simple
48. 1:47unfortunately it says
49. 1:49cipic has said that because the
50. 1:50investments were certificates of deposit
51. 1:52that were sold by a bank they were not
52. 1:54eligible for its coverage which is
53. 1:56restricted to accounts at brokerage
54. 1:58firms
55. 1:59okay so
56. 2:00these certificates of deposit which were
57. 2:03claimed to be insured by cipic
58. 2:06they were sold by bank and they were not
59. 2:07eligible for coverage so this only
60. 2:09covers counts at brokerage firms it's a
61. 2:12technicality but it's it's something
62. 2:14that investors may potentially
63. 2:16very much regret
64. 2:18and then this case is still ongoing so
65. 2:19we have yet to see how this is actually
66. 2:21going to play out
67. 2:22what a nightmare you've got the
68. 2:25corporation that's designed to protect
69. 2:26investors saying we're not going to pay
70. 2:28and the sec has to step in and sue them
71. 2:31and this just makes me wonder if
72. 2:33something happens to people's deposits
73. 2:34if dic gonna say that we don't we're not
74. 2:36responsible
75. 2:38this just goes to show you how first of
76. 2:40all politicized this is getting
77. 2:42and a lot of these entities that were
78. 2:44meant to protect investors are feeling
79. 2:45strained quite simply because
80. 2:48of all the events that have happened
81. 2:50it's hard to actually keep up with the
82. 2:51payments that you have to make to
83. 2:53reimburse investors for their losses
84. 2:57so in this situation uh this
85. 2:58technicality might
86. 3:00really be painful for the people that
87. 3:03invested in these securities because so
88. 3:05far they have not seen a penny being
89. 3:07returned to them
90. 3:08so just imagine you have your life
91. 3:10savings in this hedge fund all of a
92. 3:11sudden it disappears and even though
93. 3:14it's supposed to be covered up to a
94. 3:15certain amount cipic just tells you well
95. 3:17tough luck sorry about that it goes to
96. 3:19show you that whenever you put your
97. 3:20money into illiquid securities that are
98. 3:22not as transparent as they could be
99. 3:24hedge funds fit that description quite
100. 3:25well
101. 3:26you run the risk of simply waking up one
102. 3:28day and having your money gone now can
103. 3:31this happen in a publicly traded
104. 3:33security
105. 3:35potentially potentially but i would say
106. 3:37it's less likely
107. 3:39the public disclosure that a hedge fund
108. 3:40has to make are quite minimal
109. 3:42and this is one of the results that can
110. 3:44happen here but it's it's just amazing
111. 3:46to me that the
112. 3:48entities that were put in place to
113. 3:50provide protection are now
114. 3:52fighting amongst each other to figure
115. 3:54out
116. 3:55whether investors are actually covered
117. 3:57so it doesn't really even matter that
118. 3:59they were told that there's civic
119. 4:00coverage there's no no one really
120. 4:02takes a look at it until it's too late
121. 4:04like in this situation so that was the
122. 4:07updates the stanford case
123. 4:20bye