Securities Law Question(s)

[GlimDropper]

Help me my friends for my Google-fu is weak today. I've entered into something of a dialog with a "dinar merchant," one of those people with a website selling Iraqi dinar to US citizens at a rate far higher than the Iraqi Central Bank indicates. He also holds weekly conference calls with news and information about the pending revaluation (RV) of the dinar which seems to indicate that the value of the dinar will appreciate surrealistically and do so near any day now. I suspect these calls are instrumental in selling more of the over priced dinar from his website.

He is a registered Money Service Business (MSB) having his FinCEN Form 107 filed to prove it and that does cover currency exchangers. However the devil, as he frequently seems to be, is in the marketing. His conference calls are focused greatly on what a once in a lifetime investment opportunity that is the Iraqi dinar and one of his favorite catch phrases is that the dinar "is an investment, not a lottery ticket." A rather long and fairly tiresome example of his sales pitch is his "Dinar 101" video on YouTube. The video is close to 15 minutes long and hardly worth listening to except for unintended humor but honestly the first minute alone proves the point I'm trying to make. From which I quote:

This is strictly an opportunity to invest by purchasing the Iraqi dinar at an extremely discounted rate before the pending revaluation. The BH Group is a registered currency trader here to help you procure your dinars at the most competitive rate on the net and receive them in a punctual manner. We will guide, educate and support you through the entire revaluation process where other traders will only sell you dinar.

I am rather certain that holding a MSB registration does not give one a license to sell investments and it's clear that the Iraqi dinar is being sold as not only an investment opportunity but the investment opportunity of a lifetime. My problem is I can't seem to locate a single definitive citation on the FinCEN website that MSB's can not sell investment opportunities.

Perhaps I'm approaching the problem from the wrong direction, instead of trying to prove that being a MSB doesn't include the license to sell securities I should instead be trying to show that the group of people who are able to market investments does not include MSBs. Either way and as I said, my Google-fu is weak today and I'm having a harder time than is my norm in thinking this problem through. I'm not asking anyone here to do my homework for me but if off the top of their head anyone can point me to some applicable legislation or particularly any relevant case law you'd greatly have my thanks.

And in a completely related note, imagine I in no way was licensed to sell securities but wanted to start my own hedge fund. The second part of that is the only one that requires any imagination. What regulatory difficulties might I face if I started accepting application fees to my hedge fund before I filed even a shred of paperwork registering my fund with any controlling authority? Would the fact that I wasn't a licensed dealer/ broker/ investment adviser pose any hurdle in getting my hedge fund registered particularly in light the fact I was using the internet to solicit application fees for that fund?

And.,... I almost saved this for a follow up question but since it pertains to any answers you might offer to questions in the preceding paragraph let me pose a "hypothetical" question. If you were a District Attorney what might you have to say about me if I:

* Was not licensed to sell securities but I tell a lot of people I am.

* I tell people I'm setting up a hedge fund to invest in the "Post RV" Iraqi economy.

* I know that 99.9% of the people who might be willing to pay me a non refundable application fee to join my hedge fund do not qualify as sophisticated or qualified investors under SEC guidelines so I tell people that even though they need to pay me a non refundable $750 application fee to become part of my hedge fund I wont actually create the fund until AFTER that financial miracle known as the revaluation of the Iraqi dinar occurs. You see, after the "RV" all the people who bought Dinar will be overnight millionaires and that will make them sophisticated investors eligible to invest in my hedge fund.

* Did I mention that the $750 application fee to my hedge fund was non refundable and the event that needs to happen before I file any paperwork to initiate my hedge fund will never, ever happen.

Now assuming after any unspecified period of time elapses and at least one of the people who gave me $750 to reserve a seat in my hedge fund grew tired of waiting for the dinar to "RV" and for the hedge fund to be formed and they lodged a complaint, if you were a DA presented with those facts (and the evidence to support them) would you take an indictment to the grand jury and if so, what might the charges be?

[Kestrel]

Is the seller really in the USA? Are you sure? How can you be sure? 'Cuz if "they" are not in the USA, it's going to be pretty hard to catch them and even harder to prosecute them.

"They" want to sell you an investment opportunity speculating on highly discounted, about-to-be-discontinued currency? "They" are certainly not in this business to lose money themselves, so where did "they" get this currency from? If "they" didn't buy it outright, who are "they" brokering it for? Really????

What are you going to do if you're left holding a big sackful of about-to-be-worthless currency, with a cap on the amount you can exchange for new currency, in person only at an in-country bank, and on very short drop-dead timeline?

Assuming, of course, that "they" are even selling genuine currency.... If "they" showed you their merchandise (if it even exists) would you be able to tell if anything other than the "sample" wasn't printed by "them" with a color laser printer?

And for this once-in-a-lifetime opportunity (yea, right) "they" want a non-refundable $750 up front? That's all I need to hear. Can you say "Nigerian Scam, Iraqi subdivision"??? Run, do not walk, run to the nearest exit.

[notorial dissent]

OK, let’s start with this statement, "dinar merchant selling to US citizens ” followed by

This is strictly an opportunity to invest by purchasing the Iraqi dinar at an extremely discounted rate before the pending revaluation. The BH Group is a registered currency trader here to help you procure your dinars at the most competitive rate on the net and receive them in a punctual manner. We will guide, educate and support you through the entire revaluation process where other traders will only sell you dinar.

He may well have a FinCEN Form 107, at last hearing, they were not that hard to get, but they confer no special authority.

As of this point in time, it is illegal, let me repeat and emphasize this, ILLEGAL, to be selling dinars as an investment, someone with more memory than I can point out the actual order, but it is illegal. The only legal way/reason to be buying or selling dinars at this time is IF, and let me repeat and emphasize this, IF and only IF, you are buying them because you are planning on a trip to Iraq and need local currency. That is the reason that most, if not all of the banks that deal in currency have quit handling any dinar transactions at all.

As to the “investment” angle, bad and wrong and even more illegal. It still comes under the not authorized bit of the aforementioned order, so it is not in any way shape or form legal. Your yutz is not a licensed securities dealer or broker or anything else, not that it would matter as the underlying bit of the whole thing is not even remotely legal to begin with. The set up requirements for a “Hedge Fund” are sufficient to make it unlikely to have happened in the first place, and if it isn’t registered with the SEC it ain’t real, and there is no way this is real. The only one who will be making any money on this “investment” is the con artist off the fees and whatever else he can get out of his investors/suckers.

As to the rest of it, it is just another con game they are currently playing.

The so called reval isn’t going to happen, it is in the same class of RSN as the NESARA nonsense. What more likely will happen is a reverse split where your 10,000 dinars suddenly become 5,000 or even 1,000 and still be worth what they 10,000 was before the split, think about that before you toss any money in that direction.

In other words, run, don’t walk to the nearest egress. If you really desperately have a need to shed some excess cash, you can send it my way and you have the exact same result as getting involved with that con artist with the addition of giving me some spending money.

[Kestrel]

Run, do not walk, run to the nearest exit.

In other words, run, don’t walk to the nearest egress. If you really desperately have a need to shed some excess cash, you can send it my way and you have the exact same result as getting involved with that con artist with the addition of giving me some spending money.

I said it first, so I get an upline commission on whatever you collect. Gotta pay that upline!

[notorial dissent]

True, true, however, good advice bears repeating.

[ArthurWankspittle]

Read all about it! It's all here folks http://quatloos.com/Q-Forum/viewtopic.php?f=6&t=7047

[Kestrel]

I got to thinking: Who would be selling huge bales of currency at a big discount anyway, and this far in advance of official announcements?

1. Scam artists who don't actually have any, but want you to think they do.
2. People looking to launder money: drug dealers, black-market arms dealers, and terrorists.
3. Corrupt government officials and employees stealing from the national bank vaults.
4. Expatriates and fugitives who smuggled out lump sums of currency when they left.

Sure, there will be disaffected rural folks who have small personal caches and will have trouble reaching a currency exchange station in time, whenever that is. But the mere logistical impossibility of gathering them together into a internationally marketable group means they will be exploited by penny-ante local middlemen instead.

Can you think of anyone legitimate?

Didn't think so.

And you still want to invest in this "opportunity"???

[GlimDropper]

Thank you all for your kind attention. I knew coming in that how the BH Group (the dinar dealer) was operating was illegal, my question was more about what statute(s) are they in violation of. Is there any case law that can be cited?

Rereading what I posted above I should have been more clear on one point, there are two different groups at play here. One is the dinar dealer with the website and the weekly conference calls and the other is a low rent con artist who pretends to be a financial expert on those calls and claims to be setting up the "post RV" hedge fund. Last week I sent the dinar dealer the following e-mail: (Gratuitous website plug)

Greetings Mr. Huebner,

On this weeks BH Group call you delivered a challenge to the individuals who were calling Rudolph Coenen's integrity into question and I'm taking you up on it. Before I explain let me make one thing perfectly clear, unlike most of Rudy's critics I am not involved in the dinar scene. I do not buy them, sell them or market any dinar related services. It may seem like a strange hoby, but I'm a connoisseur of con artists and am sure Rudy is just that.

I don't recall just now what I was looking into when I first encountered Rudy but within moments of hearing him speak I knew he was a player. As I kept the interview playing in one browser window I was digging into his story in another. Needless to say his story doesn't hold together and let me show you why.

First of all his most important claim, that he was a VP at JP Morgan Chase in charge of a 500 million dollar portfolio is provably false and for more than one reason. First of all if he was working as a principle in a brokerage he would need to be licensed to do so, this is a point I'll return to but for the moment let me give you links to a couple websites. The first is FINRA BrokerCheck and the second is the SEC's Investment Adviser Search page. If anyone by the name Rudolph Coenen was licensed to sell securities in any of the 50 states and within the last decade, it would show up in those databases. But it doesn't.

Also, several time when relating the JPM story Rudy makes mention that he left that position in 2005 for health reasons, he needed a liver transplant. This part of the story is absolutely true, he was living in Temecula California and later moved to Florida because the availability of donor organs was much greater than in California. I've never met Rudy or Maribel but I believe you have, can you tell me if the photo accompanying this 2005 newspaper story is indeed them? I'm quite positive it is.

I find it interesting that the story is not about a wealthy man with the sort of health insurance a VP at a major investment firm is sure to have, it's a rather touching story about a community coming together to help out an unemployed father of four. Before and after his transplant Rudy was a sub prime mortgage broker and if the housing market didn't tank he'd still be selling no doc loans.

Is that Rudy's only lie? Hardly. He postures himself as some sort of successful investment adviser, on one of your calls Mr. Emmenecker asked Rudy a transparently planned question about his financial situation. Rudy replied that he didn't need the dinar to RV that he and his family were already "quite blessed" in that regard. As to him being any sort of investment adviser you already searched for his name in the federal databases, just to touch all bases look to see if Rudy has any sort of license to sell securities or even to charge for investment advice in the State of Florida. He isn't, is he?

OK, so he isn't a broker or investment adviser is there any reason to suspect he isn't as wealthy as he claims? Of course there is. Go to the Duval County Clerk of courts website, Perhaps data mining isn't you strong suit, I have a lot of practice with it so let me just give you a few of the better links. Here is his IRS tax lien, he and his wife still owe better than 22 grand for the 2007 tax year. He has a sorta on again off again battle with foreclosure and I believe Florida is one of those states where a judge needs to sign an order before the bank can repossess a vehicle and the 6th of this month a judge did just that to Rudy. Hey, the good thing is we finally have proof of a relationship between Rudy and JP Morgan Chase, they were the bank holding the loan Rudy defaulted on.

Let me recap, Rudy never worked for JPM, he's never been licensed to sell investments of any kind and prior to finding someone to help sell his imaginary hedge fund he was close to dirt broke. Mr.Huebner let me tell you something about con artists, they make you feel good about yourself. They have that personal touch that honest sales persons would kill for, the whole Dale Carnegie deal down flat. They push the right buttons to make you feel smart and for you to feel so special that you never stop to ask important questions at the right time. Today, your professional reputation is tied tightly to one Rudolph Coenen and you don't know him nearly as well as you should.

I help run a web forum, RealScam.com. I started a discussion about you and Rudy a while ago, in case you've never seen it you can find it here. Rudy isn't the only one I've done some digging on but honestly, I can't get a solid read on you. I'm tempted to think you might be something like a victim here. Rudy leaves a trail of slime that easy for someone like me to spot, you don't seem to. So in responding to the challenge you issued on your recent call for proof of claims against Rudy, I feel I've done that. So I'm issuing a challenge of my own. Respond to this letter publicly. I will post it in it's entirety in the discussion thread linked above and hope that you will either tell me how what I've said is incorrect or after verifying this information for yourself, what you and the BH Group will do about it.

And thank you sir for your time in reading this.

I did get a reply and though it's too soon to say for sure I believe I made some impact. He requested that I not disclose his reply and for a short period of time I'm honoring that request. I could very easily be wrong but I don't think he knew about Rudolph Coenen's background and I think he might be intending to do the right thing here.

Basic web searches to turn up the links I did on Rudy are within my skill set and let's face it, it isn't all that hard to pick a low rent con artist's cover story apart. But finding links to relevant statutes and applicable court decisions is not my strong suit. I have recommended that the dinar dealer consult an attorney who's practice includes securities law and if he does I'm sure he'll be informed that how he's running his buisness isn't legal. But if due diligence was his strong suit he wouldn't be partnered with Rudy in the first place. I'd like to provide him with something more concrete than even a very well formed opinion.

[Kestrel]

Basic web searches to turn up the links I did on Rudy are within my skill set and let's face it, it isn't all that hard to pick a low rent con artist's cover story apart. But finding links to relevant statutes and applicable court decisions is not my strong suit. I have recommended that the dinar dealer consult an attorney who's practice includes securities law and if he does I'm sure he'll be informed that how he's running his buisness isn't legal. But if due diligence was his strong suit he wouldn't be partnered with Rudy in the first place. I'd like to provide him with something more concrete than even a very well formed opinion.

I've had my fill - repeatedly - of people who walk around wearing blinders and snorting the koolaid. I know you have too. If he is so focused on a single aspect of the scam - violating securities laws - the outlook for talking him out of it is not good.

Look beyond just the securities laws. See the post I made just as you were typing yours. Lots more problems here than just securities law violations. Maybe that will wake him up.

[notorial dissent]

GlimDropper, the thing with Hedgefunds is dependent on a lot of things, but mostly the state it is set up in, and you would have to check with the securities commissioner for the state in questions to see how much regulation they impose, good bet there will be some if not a great deal, as things like this are too prone to scamming. The managers may or may not need licensing, probably at minimum financial advisor license, but anyone selling them will most likely need a state securities license, and possibly a Fed license, again pretty state dependent.

Presidential Order 13303 is what is referred to for the dinar trading, and it has been modified several times at this point since it was first issued.

[Gregg]

This sure sounds familiar, not just the dinar angle, but I'm certain we've discussed the hedge fund after the RV before....

[David Merrill]

Help me my friends for my Google-fu is weak today. I've entered into something of a dialog with a "dinar merchant," one of those people with a website selling Iraqi dinar to US citizens at a rate far higher than the Iraqi Central Bank indicates. He also holds weekly conference calls with news and information about the pending revaluation (RV) of the dinar which seems to indicate that the value of the dinar will appreciate surrealistically and do so near any day now. I suspect these calls are instrumental in selling more of the over priced dinar from his website.

He is a registered Money Service Business (MSB) having his FinCEN Form 107 filed to prove it and that does cover currency exchangers. However the devil, as he frequently seems to be, is in the marketing. His conference calls are focused greatly on what a once in a lifetime investment opportunity that is the Iraqi dinar and one of his favorite catch phrases is that the dinar "is an investment, not a lottery ticket." A rather long and fairly tiresome example of his sales pitch is his "Dinar 101" video on YouTube. The video is close to 15 minutes long and hardly worth listening to except for unintended humor but honestly the first minute alone proves the point I'm trying to make. From which I quote:

This is strictly an opportunity to invest by purchasing the Iraqi dinar at an extremely discounted rate before the pending revaluation. The BH Group is a registered currency trader here to help you procure your dinars at the most competitive rate on the net and receive them in a punctual manner. We will guide, educate and support you through the entire revaluation process where other traders will only sell you dinar.

I am rather certain that holding a MSB registration does not give one a license to sell investments and it's clear that the Iraqi dinar is being sold as not only an investment opportunity but the investment opportunity of a lifetime. My problem is I can't seem to locate a single definitive citation on the FinCEN website that MSB's can not sell investment opportunities.

Perhaps I'm approaching the problem from the wrong direction, instead of trying to prove that being a MSB doesn't include the license to sell securities I should instead be trying to show that the group of people who are able to market investments does not include MSBs. Either way and as I said, my Google-fu is weak today and I'm having a harder time than is my norm in thinking this problem through. I'm not asking anyone here to do my homework for me but if off the top of their head anyone can point me to some applicable legislation or particularly any relevant case law you'd greatly have my thanks.

And in a completely related note, imagine I in no way was licensed to sell securities but wanted to start my own hedge fund. The second part of that is the only one that requires any imagination. What regulatory difficulties might I face if I started accepting application fees to my hedge fund before I filed even a shred of paperwork registering my fund with any controlling authority? Would the fact that I wasn't a licensed dealer/ broker/ investment adviser pose any hurdle in getting my hedge fund registered particularly in light the fact I was using the internet to solicit application fees for that fund?

And.,... I almost saved this for a follow up question but since it pertains to any answers you might offer to questions in the preceding paragraph let me pose a "hypothetical" question. If you were a District Attorney what might you have to say about me if I:

* Was not licensed to sell securities but I tell a lot of people I am.

* I tell people I'm setting up a hedge fund to invest in the "Post RV" Iraqi economy.

* I know that 99.9% of the people who might be willing to pay me a non refundable application fee to join my hedge fund do not qualify as sophisticated or qualified investors under SEC guidelines so I tell people that even though they need to pay me a non refundable $750 application fee to become part of my hedge fund I wont actually create the fund until AFTER that financial miracle known as the revaluation of the Iraqi dinar occurs. You see, after the "RV" all the people who bought Dinar will be overnight millionaires and that will make them sophisticated investors eligible to invest in my hedge fund.

* Did I mention that the $750 application fee to my hedge fund was non refundable and the event that needs to happen before I file any paperwork to initiate my hedge fund will never, ever happen.

Now assuming after any unspecified period of time elapses and at least one of the people who gave me $750 to reserve a seat in my hedge fund grew tired of waiting for the dinar to "RV" and for the hedge fund to be formed and they lodged a complaint, if you were a DA presented with those facts (and the evidence to support them) would you take an indictment to the grand jury and if so, what might the charges be?

There seems to be a lot of wild speculation about:

An Iraqi government consultant, former FBI prepared this report for me. The closet full of dinars belonged to his cousin. It was worthless overnight under Saddam. [The Northern Kurds could not redeem them; they were being exterminated.]

I suggested that 1000 dinars in hand today might be worth $3000 after the Revaluation and he retorted, No Way! - - NO WAY!! He explained that properly timing the revaluation might be profitable and his relatives want him to hold a bunch of dinars here in the US with him. But the profit margin is just not worth it.

I think he is likely right. For 1000 dinar to become worth $3000 is absurd.


Regards,

David Merrill.

[Gregg]

Today, 1000 dinar isn't even worth a dollar. I think it's like 85 cents. And that is an artificially supported rate, if allowed to float I'd expect it to lose half that value.

[Pottapaug1938]

An Iraqi government consultant, former FBI prepared this report for me. The closet full of dinars belonged to his cousin. It was worthless overnight under Saddam. [The Northern Kurds could not redeem them; they were being exterminated.]

I suggested that 1000 dinars in hand today might be worth $3000 after the Revaluation and he retorted, No Way! - - NO WAY!! He explained that properly timing the revaluation might be profitable and his relatives want him to hold a bunch of dinars here in the US with him. But the profit margin is just not worth it.

I think he is likely right. For 1000 dinar to become worth $3000 is absurd.

Regards,

David Merrill.

I agre with you on this one, David. Expecting 1000 dinar to become worth $3000 IS absurd, and any profit margin one might get would not be worth the hassle; but the absurdity has more to do with the way that revaluations work. To give one example: years ago, the French enacted a currency reform, in which 100 old Francs became one New Franc. My wife, who 40 years ago at this writing was either in France or one of the neighboring countries, remembers seeing a "100 Franc" coin in circulation; but it was valued at 1 Franc. The pre-1960 aluminum 1 (old) Franc coins passed as 1 New Centime, and so on. Other countries (Mexico, Turkey, to name two) have done things the same way. All that will happen is that new money will be exchanged for old, and no one will gain anything substantial as a result.

[notorial dissent]

I can't remember there ever being an occasion where an old currency was revalued upwards. If a country does a reval it is usually because either the currency is so badly inflated that you can't carry enough of it around with you to pay for anything, Weimar Germany being a prime example, or else the currency has been counterfeited or there is some other major problem, and usually in those cases the holders of large chunks of currency come out the loser as either they aren't allowed to convert, or it just isn't worth anything to begin with. An even better example is the current Zimbabwean currency that isn't worth anything and there are billions of Zimbabwean dollars outstanding and all of them worth absolutely nothing. They may be a case of when and if they ever actually get an economy again they'll just have to start over from scratch since the current money isn't even worth anything as pulp.

There is just no logical reason why a country would reval their currency upwards, if their economy amount to anything to begin with, it would take care of it on its own without having to go through all the other rigamarole.

[Lambkin]

I spent a month in Yugoslavia in 1989 which was not long before they revalued 10,000 to 1. When I arrived they had just started printing 50,000 dinar notes. Three weeks later they started printing 100,000 dinar notes. In some shops the cash register's coin cups held pieces of candy which were given out as change. In Croatia one pub keeper informed us that ten years earlier 30,000 dinars was good pay for a month's work, and in 1989 it was worth two beers. After the revaluation the individual states abandoned the currency and issued their own, probably advancing the break-up of the country. It's hard to imagine how speculators could make any money in that environment, although if there was a way to corrupt the process I'm sure they did it.