The Nigerian Prince Goes Corporate
A former Morgan Stanley broker allegedly gave the classic scam a Wall Street makeover
“Risk comes from not knowing what you're doing.” – Warren Buffett
If you’ve never received an email from a Nigerian Prince, you haven’t been reading your spam folder.
The Nigerian Prince routine – also known as the “advance-fee,” or “419” scam – has been a running joke for decades. It’s been lampooned on “Saturday Night Live” and other comedy shows. Variations of it go back centuries. Yet it still dupes people millions of dollars a year, according to the FBI.
Now comes a former Morgan Stanley broker who allegedly took the scheme to an institutional-grade level, claiming exclusive ties to a sheik in Qatar. His victims: a Wyoming company with a publicly traded affiliate and a wealthy individual who invested $1 million on the promise of returns as high as 200% in 30 days.
Business Blunders readers know the drill:
Financial advisor Darrell W. Rideaux and his Brea, Calif.-based Gauntlet Holdings allegedly claimed access to $7.98 billion in a Doha bank, according to the Securities and Exchange Commission. They claimed it was held by a sheik connected to the royal family of Qatar.
The payoff would be huge, if only the story were true.
Last week, a federal judge ordered Rideaux and Gauntlet to pay nearly $1.85 million in disgorgement, interest and penalties. But the case remains an oddity: No criminal charges have been filed; the SEC won without a trial after the defendants repeatedly failed to comply with court-ordered discovery; and Rideaux hasn’t commented publicly on the case.
Here’s a tip that could have prevented the whole I-know-a-sheik debacle: Before handing money to a broker, spend 30 seconds checking their record on FINRA’s BrokerCheck website.
In Rideaux’s case, investors would have found a customer complaint alleging he solicited investments that were not authorized by his firm. They also would have learned that the Financial Industry Regulatory Authority permanently barred him from the securities industry in 2018. That order came after he refused to testify during the regulator’s investigation into allegations that he sold private-placement investments that caused investor losses.
But no. Gauntlet described itself as a “family office” that is not registered with FINRA and was exempt from SEC registration. So why bother with pesky regulators?
Besides, Rideaux was a defensive back at University of Southern California, where he played on the Trojans’ 2003 Orange Bowl championship team. In 1999, a piece on the USC’s website called him a “darting blur of kinetic energy.”
After college, he signed with the Indianapolis Colts, but never played in a regular season game. So the “darting blur” became an investment advisor and apparently found investors who couldn’t see clearly.
