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This Week In Blunders – June 22-28
“Crypto is a playground for scams and frauds, nothing more.” – Charlie Munger
There was a point where Michael Zidell, the scion of a Dallas real estate family, thought he had $300 million worth of non-fungible tokens on a platform called OpenrarietyPro.
He was also falling in love.
Carolyn Parker – whoever she was – initially contacted Zidell on Facebook, according to court filings. Their conversations then moved to WeChat, phone calls and video calls. It was a “friendly, social relationship,” according to court filings, but Zidell “later perceived a romantic one developing.”
What’s not to love? Parker purported to be a successful California businesswoman who was making millions trading NFTs on OpenrarietyPro. She encouraged Zidell to invest in these dubious blockchain coins. Over time, he wired $20 million onto the platform through different banks, and he watched his balance rise to $300 million, according to court filings.
It must have been exhilarating. Apparently all Zidell needed for confirmation was a statement, or a screen, that showed his investment was growing wildly. Until, poof! Carolyn Parker and OpenrarietyPro simply vanished in the ether.
Zidell was the victim of a classic pig-butchering scheme – where perpetrators slowly build trust and encourage a chain of increasingly large investments before going in for the kill. Cryptocurrencies make it possible with the promise of easy riches and even easier transfers of money into international crime syndicates.
Here’s a handy tip from the FBI: “Never send money to anyone you have only communicated with online or by phone.” That sounds obvious, yet last year alone, such scams resulted in more than $5.8 billion in reported losses, according to the FBI.
Bloomberg Businessweek’s Zeke Faux has done a fabulous job of tracing a pig-butchering scheme to a prison-like compound in China where trafficked souls are held against their wills and forced to blast out those scammy messages that almost everyone gets these days. It’s enlightening and frightening to listen to his findings on NPR’s Planet Money:
Last week, Business Blunders posted an update on a banker who embezzled $47 million and lost it all in a pig-butchering scheme. You’d think someone smart enough to run a bank wouldn’t be such an easy mark, but the quest for fast money can be clouded with emotions.
For his part, Zidell attended Southern Methodist University’s Cox School of Business and he is president of Zidell Property Management, according to his LinkedIn profile. So what’s he do with his business acumen from here?
On Tuesday, Zidell filed a lawsuit against Citibank, alleging that his staggering losses are at least partially the fault of the nation’s third-largest bank. His trust funds filed similar actions against Citibank and other banks last year.
The banks should have flagged his unusually large transfers and vetted these phantom scumbags who ripped him off, his lawsuit claims.
Maybe so.
To be sure, banks have a slew of technical regulatory obligations under the Bank Secrecy Act, including “Anti-Money Laundering” and “Know Your Customer” requirements. So it will be interesting to see where Zidell’s claims go.
But dude … Banks are not your babysitters.
Banking on bribes
When scammers need a legit bank account that can’t be traced back to them they can sometimes turn to someone in the bowels of the financial system – someone like Jorge.
For a small bribe of $200 to $250 a pop, the former employee of TD Bank in Naples, Fla., would set up unauthorized accounts.
On Wednesday, Jhonnatan Steven Rodriguez, 32, a.ka. Jorge, pleaded guilty to setting up 140 unauthorized bank accounts for scammers.
“Numerous individuals who paid RODRIGUEZ to open accounts in this manner ultimately perpetuated check fraud through their bank accounts, including with both fraudulent personal checks and fraudulent cashier’s checks,” according to court documents.
Rodriguez now faces up to 30 years in federal prison and a fine of up to $1 million. He’s finally getting a check … reality check.
Car Wreck Clyde
Houston personal injury lawyer Clyde J. Moore on Thursday pleaded guilty to stealing $2.4 million from his clients.
Moore, who goes by “Car Wreck Clyde” in advertisements, skimmed his clients by inflating medical expenses and diverting money from their settlements into his personal accounts.
Moore used the loot to pay private school tuition for his children, fund an investment account for himself, and buy two Ferraris, according to court filings. Perhaps Car Wreck Clyde needed two Ferraris – just in case he lived up to his name.
He also shared stolen funds with members of his firm who helped carry out the scheme, including Mark A. Broussard, who has previously pleaded guilty.
They each face up five years in prison and $250,000 fines.
It’s quite a spectacle whenever a so-called officer of the court goes down like this, but somehow, Train Wreck Clyde doesn’t sound as catchy.
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"Behind Business Blunders In a rare podcast appearance, hosts want to know who is the intended audience for Business Blunders, and what is my goal for this publication? Like I know?"
Great job as always Al! As if the "hosts" can't figure out that the answer is every dim-witted jerk out there that falls for these scams! Keep up the good work! Tony Heller, former adjunct Professor of English