Fintech is making it safer to invest

Fintech is making it safer to invest.

There have been a number of scandals involving investment funds over the years, most recently the Woodford Equity Income Fund which was wound up last January to lock in a loss of around $1bn. However, although this was headline making, it’s a drop in the ocean compared to some of the scandals that went before.

Transparency is something that we at The Portfolio Platform are constantly repeating as a reason why our platform is a cut above the rest. Investors positions can be seen live, on an app, with a current equity value at all times. They also have access to a control panel allowing them to increase, decrease or even liquidate whenever they want, no questions asked and the capital returned.

For us as traders, being able to say this, is so important, but do investors realise just what a unique selling point this is? Here are a few more fund scandals to remind us all just how important transparency is in the investment market. Do you know exactly what your money is invested in and where it is? Large funds have gotten away with incredible losses in the past, don’t let this happen to you.
 
Bernard Madoff Investment Securities:
This was quite simply a Ponzi scheme of epic proportions. He was using new investment, to pay off previous investment. What is so shocking, is that he was such a well-respected investment professional throughout his career. He even served as Chairman of the National Association of Securities Dealers, and helped to launch the NASDAQ exchange.

In 2008 Madoff admitted that his asset management business was fraudulent. Even though the SEC had been alerted several times over the years that his returns weren’t accurate, they brushed off the allegations after minimal investigation. It is estimated the total value of the fraud cost investors around $65 billion.
 
SAC Capital:
SAC Capital, run by Steven Cohen, was one of the leading hedge funds on Wall Street with $50 billion in assets under management. The SEC had been investigating the hedge fund for a number of years before conducting raids at their offices in 2010. In total, eight employees of SAC Capital have been convicted and imprisoned.

Unfortunately the SEC only managed to file a civil suit against SAC Capital in 2013, whereby SAC ultimately agreed to pay a $1.2 billion fine and to stop managing outside money in order to settle the suit. As of January 2021, Cohen runs Point72 Asset Management, which manages his personal wealth of around $10 billion.
 
Stratton Oakmont:
Those of you who have seen Wolf of Wall Street will be familiar with Jordan Belfort. The truth of this story is one that will shock you more than any work of fiction ever could. The New Yorker’s market manipulation scam was a classic case of pump and dump.

He would buy certain stocks, then his team would cold-call investors and use their money to invest in those same stocks to inflate the prices. Once the prices had soared, Belfort would cash out of his own shares for a huge profit. The victims of the fraud would suffer the fallout from the plummeting value of their shares.

This is actually exactly what we are currently seeing happen with GameStop shares, only rather than cold-calling, the scammers are using investor blogs and sites in order to entice investors into buying more and more stock so the originators of the scam can then liquidate their own holdings for massive profit. Sadly, many retail traders will lose much of their investment when the price eventually drops back down to its fair value (est. $30-40).

James Paul Lewis, Financial Advisors:
Just because they are a financial advisor does not mean you should hand over money without asking any questions. Lewis was the driving force behind another pyramid scheme to cheat investors out of around $311m over a 20 year period.

He relied on referrals from his clients to gain new investors, with the promise of high returns. On 22nd December 2003, the SEC filed a complaint alleging that Lewis had committed securities fraud. Records show that he used investor capital to buy luxury cars and expensive jewellery with the last investors into the scheme losing everything. The judge who convicted it described it as ‘a crime against humanity’.
 
All of these were pooled investments into large corporations with sophisticated systems and regular reports. With The Portfolio Platform you get your own personal account that you, and only you, can log into at any time. The money is held with a custodian and merely ‘linked’ via our autotrade system. It’s your account and only you can access it. There is no way for anybody else to use the funds.

The financial world has changed and TPP are at the forefront of the financial technology revolution. You should always know where your money is, don’t let these examples of the past ever happen again.
 
Enjoy your investment, but let the professionals help. Visit The Portfolio Platform.
   
This article was written by Edward Davies of The Portfolio Platform. If you would like more information on how you can sign up to the platform, book in a call here. The Portfolio Platform allows you to simply connect your account to one of the professional strategies showcased. Once you are autotrading, you don’t need to do anything. Watch, and enjoy.