From: fritz@hpfcbig.sde.hp.com (Gary Fritz (tmp))
Subject: Off-shore investment trusts??
Reply-To: Gary Fritz <fritz@hpfcbig.sde.hp.com>
Organization: HP SESD, Fort Collins, CO
X-Newsreader: Tin 1.1scd1 PL4
Date: Tue, 15 Sep 1992 18:06:50 GMT

I've just been introduced to an interesting "investment vehicle" and wondered
if anyone else had ever heard of such a thing.

First off, let me tell you that when I saw it my "scam alert" meter pegged
and broke the needle.  If this had come in the mail, as most things like
this do, I would have laughed hysterically and chucked it.  However, it was
given to me by someone I know pretty well and respect, and he has some
experience with similar instruments (detailed below), so I'm giving it
a more serious look.

I'm not interested in knee-jerk flames and "This must be a scam" replies -- 
I've gone through that argument myself, thank you -- so *PLEASE* spare
everyone the trouble of skipping them.  **IF** you have PERSONAL EXPERIENCE
with something like this, or have SOLID KNOWLEDGE OR EVIDENCE (**NOT OPINION
OR HEARSAY!!**) about why it would or would not work, I'd appreciate hearing
from you.  All replies will be held in strictest confidence.  I will
summarize any responses I get to the net.

With that warning in mind...

I don't understand all the details yet, but basically this is an
off-shore investment trust based in Aruba (an island in the Caribbean).
They say they invest in arbitrage deals with rapid turnover, which allows
them a nice markup on a very frequent basis.

The idea is that you can purchase investment paper in LARGE blocks, at a
discount, and sell it in smaller blocks at a smaller discount, which gives
you your profit.  They give the example of Salomon Brothers buying $100M
of CD's or something for $80M (a 20% discount) and selling it in smaller lots
at $90M (10% disc), to someone who turns around and sells even smaller lots
for $95M (5% disc), and so on.  Obviously if you can do this you have a
license to print money.  (Of course, if you could do this, why would you
bother doing anything ELSE, like running an investment house?  Maybe to
provide the money to fund these arbitrages?)  The explanation is more
complex than that, involving international trading, arbitrage in exchange
rates, & whatnot, but I don't have it here with me so I won't try to 
cover it here.  But they DO claim it's virtually impossible for the value 
of the trust to go DOWN, since they're buying and selling commodities of 
reasonably known value.  Or something like that.

There's a fair amount of "the big boys do this all the time, but plain folks
like you and me can't -- unless you get in on a consortium of buyers who
do it together" sort of stuff.  All of which bent my scam meter even more,
but I kept on reading.

They claim they will, "conservatively", return 15% PER MONTH on this deal.
It wouldn't take long for money to compound nicely at that rate!  By this
point my scam meter was smoking and emitting sparks.

But my friend says he has invested in a number of similar instruments over 
the past 4 years, and the one he did last year (a mediocre performer, he says)
returned him almost 300%.  We're meeting next week so he can show me the
paperwork to prove it.  He also mentioned several prominent and well-respected
members of the local community who have been, and are, his partners in
these ventures, and offered to hook me up with them so I could verify it.
He says word of these things is usually passed around through an established
network of people who know and trust each other.  That was necessary,
because all the ones he's seen before had a minimum purchase of $5-10k.
Most people wouldn't part with that sort of cash for a wild scheme like this
unless they were certain they could trust the person they were working with.
This one, though, has a minimum of $200 (less, actually -- more in a sec),
which is a pretty non-threatening level for people to dip their toes in
the water.  If it works out well and they like it, they can always add
more funds later.

Why is my friend telling me this?  Not entirely out of the goodness of his
heart.  He gets a "commission" on this.  The minimum to open a new account 
is $200, of which $100 is placed in your trust, $50 goes to the administrator
for account set-up and overhead charges, and $50 goes to the person who 
found the new investor.  (Note this is NOT a multi-level deal; he gets nothing
out of any people you sponsor.)  But he says he will kick back the $50 to me,
since he isn't interested in the up-front straight "commission".  Instead, 
he's looking at the long-term returns.

See, the way this thing is set up, all expenses for the fund are paid for
out of PROFITS.  They do not take x% of your total fund for expenses;
they take 30% of any GAINS you get.  10% is kept by the administrators,
and 20% is returned to the investor's sponsor as an ongoing residual.
Therefore my friend won't make a dime off my investing in this unless
I make money on it.  He gets nothing if I go out and sponsor new investors,
only if I get a good return on the money I personally invest.  And if
it really generates returns like they claim, you could pull out your
original investment in 6 months and let your account grow on "their nickel".

In explaining some of the details of the deal, and mentioning some prominent
people I know who are involved (which he will document next week), he mentioned
that they've been doing investment trusts like this for 20 years in Aruba,
and in fact the Lt. Governor of Aruba is personally involved in this one.  
"Interesting," I said.  "It turns out I'll be in Aruba in about 2 weeks,
during a cruise we're taking."  He said, "Hmmm.  You know, I'd really like
to help you feel comfortable about this.  My investments in it are throwing
off lots of income already, and I wouldn't mind a quick vacation.  How about
I meet you down in Aruba and introduce you to the people who are organizing
this?"  (!!!!)  This is someone who lives 5 miles away from me!  I get the
feeling that 1) he's *serious* about this, 2) his investment must be giving 
some damn nice returns, and 3) he must be pretty confident I'll like what 
I see, and will as a result put enough money into the fund to make his effort 
worth while.


OK, I assume by now I've shorted out every scam meter on the net.  :-)
Again, please, if your response is "Oh, that's crazy, that's a scam,"
please refrain from posting it.  I understand and mostly agree with your
position, and you don't need to waste net.bandwidth to tell it to me.  
I know all the warnings about Ponzi schemes, "If it sounds to good 
to be true...", etc., already.

**BUT** if you have **PERSONAL EXPERIENCE** in something like this,
I would very much like to hear from you, either posted or via email.
Your privacy will be respected.  I will also try to answer any questions 
that people have.

Thanks,
Gary
From: duanej@hpfcso.FC.HP.COM (Duane Jacobson)
Date: Tue, 8 Sep 1992 19:43:50 GMT
Subject: Re: Is there going to be a tax credit or what!!!!!
Organization: Hewlett-Packard, Fort Collins, CO, USA