Hey, if there’s one guy in finance that you can trust its Warren Buffett, right?
Yes, but just make sure that if someone claims Buffett is involved in an investment scheme, that he really is.
The SEC has busted a California scam — what basically looks like a Ponzi scheme — which claimed Warren Buffett was its honorary chairman:
According to the SEC’s complaint, International Realty Holdings, Inc. (IRH), Ottoniel Medrano (a prison guard at California City Correctional centre), and Leticia Isabel Medrano have raised hundreds of thousands of dollars from investors in several states since October 2008. The defendants defrauded investors by falsely claiming, among other things, that Warren Buffett is IRH’s “Honorary Chairman,” that Berkshire Hathaway and Credit Suisse are involved in the investment, and that IRH has $4.8 billion in total assets and owns various properties throughout Asia. After obtaining money from investors, the Medranos transferred funds to offshore bank accounts.
The SEC’s complaint, filed in federal district court in Los Angeles, CA, charges IRH and the Medranos with raising at least $485,000 and likely more than $700,000 in selling preferred stock in IRH. The rate at which the defendants have raised funds has increased substantially over the last two months, averaging about $250,000 per month. According to IRH’s offering materials, defendants intended to raise up to $6 billion in the offering.
Ugh. Let’s just face it. The idea of protecting investors with regulation or education is dead. Seriously, a prison guard in California was able to raise more than $700,000 this way? If this weren’t on SEC.gov, we wouldn’t have believed it.
Advice to investors. If you’re curious whether it’s the real Warren Buffett managing your money, check to see if the company’s name is BERKSHIRE HATHAWAY. That’s just a good rule of thumb.