MTN Trading Programs

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MTN Trading Programs

There have been frauds since they first surfaced. But they, like  pesky Nigerian inheritance scams and lotto winnings, just do not seem to go away.

An example from Treasury.Gov as an opening description that might be used for an MTN fraud

The trading in “bank debenture instruments” is a multi trillion dollar industry worldwide. Top World Banks (Money Center Banks) are authorized to issue blocks of debt investments like Bank Purchase Orders (BPOs), Promissory Bank Notes of Mid-Term Notes (MTNs), Zero Coupon Bonds (Zeros), Documentary Letters of Credit (DLCs), Stand By Letters of Credit (SLCs), or Bank Debenture Instruments (BDIs) under International Chamber of Commerce guidelines (ICC – 400 7 500).

Prices of these instruments are quoted as a percentage of the face amount of the instruments, with the initial market price being established when first issued.

These MTN programs or trading programs all come with excellent documentation on how they work and how banks make money using them.  The explanations are good, well documented and seem plausible.  These are the three hooks.   Money Center banks use them. There is excellent documentation in particular all of the due diligence done by the trading parties.  Last of all – it seems plausible.

Fraudsters also add additional language such “blocked accounts”- an account that someone sees but cannot access.  So if you, madam investor, put a million dollar bank instrument, in an account it can be used for trading but it will never be lost.

Points of Logic:

If you have to put a financial instrument into a blocked account and the instruments will never be at risk, why is it in the account in the first place?  If it is not at risk why not just take a picture of the title to the Petronas Towers or pictures of 100,000 100 dollar bills?  If the instrument is not at risk why is it even needed?

Trades described are simple, for example on case we look at the fraudster was able to trade 3 to 4 times a week and she – the fraudster – was able to make about 1 percent per trade.  She was a small trader and was only using 300 million instruments.  This is a typical description.  A quick day trade to make 1% does not seem like a lot if funds are at risk and 1% does not seem to be that much money.  That they do this every day – seems to provide almost a mechanical certainty to the MTN Bank instrument trading.

Points of Logic:

If one were to be patient, not withdraw any money from this scheme, after 1,098 iterations of the 1% per day trade described above what she, our trader would have is as much money as the US’s GDP.  After 1,252 iterations and she would have more money than the World’s GDP. As there are 252 working days in a year, she would need 4.36 years to outstrip the entire US productivity (GDP) and just under 5 years to have more money than the world makes in goods in a year.

Further, if this type of trade can make so much money why are the banks allowing you – the public to even play?  How is allowing someone else to get these big returns in the best interest of the banks?

But – yet people make this investment.  These points of logic are ignored as well as asking and answering the question, does the investment make any fiscal sense?

The fraudsters are successful in getting investor’s money by overwhelming the investors with facts and numbers.  If any argument is raised against any of these facts or numbers the investor is berated not only in private but in public.  The investors are berated as being ignorant and lacking any sense of financial sophistication.  Further, the fraudster will accuse the dissenting investor of pretending to be financially sophisticated and thus lying to the fraudsters and thus to all of the other investors.  The fraudster’s objective is utter and total humiliation of the dissenting investor and the destruction of any shred of credibility of that investor.  This brutality is required as no ounce of doubt can be permitted to enter the minds of the current crop of investors and doubt must be planted in the dissenter investor’s mind about their own credibility – if only to dissuade the dissenting investor from going to any regulatory authority and being humiliated (by being wrong) – yet again.

The MTN schemes are very persuasive.  These MTN schemes have co-opted the very people who ought to know better.  I have seen trust company officers, officers of publically traded mutual funds, owners of good sized businesses, and even – treasury officials and lawyers seduced by these schemes.  Most central banks and their public outreach services evening have warnings on these schemes. That is how persuasive these schemes have been.

So what is the defense of the fraudsters when caught?  It is a three-phased defense that is as predictable as the daily sun cycle.

The first defense is denial combined with bombast and counter claims against the victim.  As many of these investment schemes have privacy clauses in the subscription agreements with forfeiture penalties if any disclosures have occurred – the fraudster immediately works to force the forfeiture of the victim’s investment. The second defense is to contest venue of the jurisdiction as all of these MTN programs are run from several jurisdictions.  The third and final defense is to blame the investors. Based upon the outrageous returns the investor ought to have known better and take the stance of investor beware.  The fraudsters essentially blame the victim for the rape.

MTN schemes are a FRAUD.  Any time you see such a scheme, report it, put it out on the web, and name names.  None of them are real – it is all a chimera.  There is no such thing.

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