Standard Chartered and Bernie Madoff

A class action lawsuit was filed yesterday in Miami on behalf of investors in Standard Chartered Bank International and Standard Chartered Private Bank. The suit seeks to recover millions of dollars in customer fees improperly charged by Standard Chartered.

According to the case filings, Standard Chartered purchased shares in a Fairfield Sentry Hedge Fund, one of the infamous Madoff feeder funds, on behalf of certain clients.  Standard Chartered customers were charged fees based on the net asset value of their accounts with the Sentry Fund.

Since the Sentry Fund was essentially worthless after Bernie Madoff was exposed, fees paid by Standard Chartered customers, through investments in the Sentry Fund, were based on fraudulent asset valuations. According to the suit, the Plaintiffs are seeking to recover more than $5 million from Standard Chartered, which has since conceded that it was not entitled to charge these so-called “phantom fees”.

Recovering these “phantom fees” is clearly an important first step.  But presumably in exchange for those fees, Standard Charter was in an advisory role, and responsible for due-diligence.

Zamansky & Associates is investigating potential wrongdoing related to internal controls, due diligence breakdowns and negligence which may have occurred.

If you are interested in discussing potential losses or have additional information regarding this investigation contact Zamansky & Associates.

Tips to Avoid a Ponzi Scheme

1. Be wary of recommendations from brokers or financial advisors based solely on the fact that they are a member of an organization or religious or ethnic group to which you belong.
2. Investigate the investment thoroughly and check the truth of every statement you were told about the investment.  You can research on the Internet any stocks or other investments that are being pitched.
3. Be very cautious and avoid promises of “guaranteed” returns or spectacular profits.  In the last year or so, the market has declined over 40%.  Anyone promising to make money such as 10 or 15% on an annual basis when the market is going down is likely to be a phony.
4. Be skeptical of any investment opportunity that is not in writing.  If someone has something real to offer they will put it in writing, otherwise it is not real if simply said orally.
5. Don’t be pressured or rushed into investing in a “once in a lifetime” or “can’t miss” opportunity.  Legitimate investment opportunities are not rushed to investors and investors must be given time to carefully think about and investigate the proposed opportunity.
6. Check out your brokers on FINRA.org.  Check out your broker’s customer complaint, regulatory history and employment history .
7. Check out investment advisors on the SEC’s database.
8. Do not do business with unregistered investment advisors.
9. Avoid anyone who has prior customer complaints or regulatory problems and avoid brokers or advisors who have switched firms repeatedly (at least three changes in a five year period).
10. Make sure that any investment is held at a known reputable financial institution (Citibank, Bank of America, etc.) and that there is a specific account with your name on it and an account number.  Verify that the money is in fact being held by the bank.
11. Never make a check out personally to an investment advisor or a small unknown company.  It is possible or even likely that your money will be stolen.
12. Check to see if the investment advisor has a website.  If there is no website, this is a big red flag that your broker or advisor is not legitimate.
13. Make sure you understand the investment advisor’s strategy and what he or she will put your funds in.  If you don’t understand it after speaking with the advisor and doing your own independent research, avoid the investment.
14. If it‘s too good to be true, it probably is.