Two recent articles highlight the current state of what appears to be known and unknown concerning the situation, including the potential of customers to “get their money back.”

These two articles are the January 30 Wall Street Journal article titled “Money From MF Global Feared Gone” as well as the January 31 New York Times article titled “After a Delay, MF Global’s Missing Money Is Traced.”

Overall, I find the events that have transpired at MF Global to be highly disconcerting, and they raise many questions about broader issues concerning financial institution and financial system integrity.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1325.81 as this post is written

This Ponzi scheme was particularly brazen as it targeted federal law enforcement personnel.

The story is an interesting one.  I would slightly disagree with one statement in the article, “As primitive as they are, Ponzi schemes are not easy to spot.”  I would say that some Ponzi schemes are more obvious than others; as well, I wouldn’t classify Ponzi schemes as “primitive.”

I have previously written a few posts on investment frauds and Ponzi schemes, as I believe that this is a topic that has important implications for both investors and capital markets.

A Special Note concerning our economic situation is found here

SPX at 1098.87 as this post is written

The first is titled “Our Ponzi Nation: Florida Entrepreneur Hit With Charges.”

The second is titled “Alleged Ponzi In Colorado Has Shades of Madoff Affair.”

Also, there was an interesting story from April 17 titled “Report Says SEC Missed Many Shots At Stanford.”

I have been intermittently commenting about the growing number of investment frauds being uncovered.  Ponzi Schemes, although seemingly common, are just one form of investment fraud.

The main question remains how much investment fraud is still undiscovered?  As I commented in the March 7 post, “…I would say that there is much investment fraud still “out there” (i.e. yet to be uncovered) and the true figure will likely prove to be eye-popping.”

As well, I believe there are significant amounts of other fraud types still undiscovered, such as that at the corporate level.  This corporate fraud includes corporate accounting misrepresentation.  Of course, Enron remains the most famous example of corporate accounting fraud.

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SPX at 1186.69 as this post is written

Here is yet another alleged Ponzi scheme as seen in Thursday’s Wall Street Journal article titled “SEC Charges Couple in Florida Ponzi Scheme.”

As seen in the article, this alleged scheme is stated at $135 million.

It is difficult to say how widespread investment frauds are and how much investment fraud is yet to be uncovered.

However, based upon a variety of factors I would say that there is much investment fraud still “out there” (i.e. yet to be uncovered) and the true figure will likely prove to be eye-popping.

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SPX at 1138.70 as this post is written

http://www.economicgreenfield.com/2009/11/27/investment-frauds/

Here is a story from December 28 titled “Ponzi collapses nearly quadrupled in ’09″:

http://finance.yahoo.com/news/AP-Ponzi-collapses-nearly-apf-898755198.html?x=0&sec=topStories&pos=4&asset=&ccode

While I find this article’s statistics to be of interest, I do not necessarily agree with some of its commentary.

Of course, there are many types and permutations of investment frauds, of which Ponzi schemes are just one type.

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SPX at 1132.99 as this post is written

http://www.economicgreenfield.com/2009/06/29/more-madoffs/

Since that June post, there have been a number of investment frauds uncovered.  Of course, none have rivaled the size of Madoff’s; however, they haven’t been small either.

Perhaps the most disconcerting aspect of these frauds is that most appear to be unsophisticated.   This could signal that there are many more that have yet to be uncovered, as the “bar” or “barriers to entry” for committing sizable investment frauds seems to have been set low.

I do believe there are many investment frauds, of different types, waiting to be uncovered.  Sadly, the vast majority of these frauds should have never happened if proper due diligence was performed by investors.  For whatever reason, a sense of wariness towards many of these investments seems to have been nonexistent for whatever reason.

While a discussion of due diligence is beyond the scope of this blog post, many of these frauds possessed similarities which should have instantly raised suspicions. 

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SPX at 1097.96 as this post is written

http://www.cnbc.com/id/31610169

A few months ago, I wrote an article titled “Crime During Economic Stress,” that is listed under the “Individuals” section (about halfway down the page) here:

http://www.economicgreenfield.com/prosperitybypencom-directory/

One of the questions that I have is whether there are more frauds in existence that haven’t yet been uncovered?  As I discussed in the article, the Madoff fraud really didn’t appear to be overly sophisticated, and there have been various other frauds uncovered over the last few months.  Have all of the frauds been uncovered?

This question is especially important for a variety of reasons.  Perhaps chief among these reasons are the following:  unraveling frauds are the among the quickest way to lose money;  and uncovered frauds are devastating in that they destroy confidence and raise many doubts. 

SPX at 926.72 as this post is written