Three things happened over the past few days that reminded me once again how much BS and deceit there is in the trading world. But before I start, I’d like to quickly answer those who think along the lines of: ‘why do you even care, just mind your own business’. I care because these guys bring the entire profession into disrepute – and since they are either unregulated or fly under the radar, someone has to call them for what they really are.
1. Charlie Burton, who appeared in BBC’s Traders: Millions by the Minute documentary didn’t like the fact that I doubted the emperor has clothes in this article so he left a comment, threatening me with legal action (!!). What’s been Mr. Burton up to since I wrote that in October 2014? Has he provided any verified performance on his website (ezeetrader.com – really confidence inspiring name, eh Charlie ?) No, he started another site, which has sleazy salesmanship written all over it.
2. I just became aware that a couple (as in man and wife) of Twitter trading gurus – https://twitter.com/NorthmanTrader and https://twitter.com/Mella_TA hasn’t been heard of for almost a month now. Rumor has it that Sven Henrich aka NorthmanTrader lost some big money for people that trusted him to manage their accounts (apparently in an unregulated manner). The lesson here: just because you’re a prolific tweeter, have many thousands followers and appear via phone on CNBC, it doesn’t mean you’re a good trader or actually trade at all. I really like this quote from the CNBC piece:
While Henrich doesn’t manage any money, his chart work on NorthmanTrader has garnered a significant amount of attention in the online world.
The ‘doesn’t manage any money’ part was surely intended to mean ‘doesn’t manage any other people’s money’. But from a cynical point of view, it can mean ‘doesn’t have a live account’ – a distinct possibility since we don’t have proof otherwise.
Update 31/07/2016: Northmantrader has written this article telling his side of the story and answering Twitter critics.
3. Speaking of ‘trading experts’ who are big on social media, I came across the case of Keiko Kawamura, a 27 years old woman who was charged by the SEC in 2014 for an alleged scheme to defraud and for fraudulent misrepresentations and omissions. Below are some fragments selected by me, alternatively you can read the whole proceeding here:
In August 2012, Kawamura started a website kawamurafinancial.com where she provided investment advice for a monthly subscription fee until February 2014. Kawamura solicited subscribers through a number of misrepresentations, including falsely claiming that she obtained an annual return in excess of 800% in her personal brokerage account (in fact, she lost all of the money invested in the account), that she had managed millions of dollars, and that she had nearly ten years of experience in the financial industry.
Contrary to Kawamura’s representations to investors that she would invest all of the funds she raised in stocks and options, she misappropriated much of the hedge fund’s money to pay for her living expenses and for luxury vacations to Miami and London. Of the approximately $55,000 Kawamura did invest, she pooled the money in one brokerage account and lost it all in highly risky options trades.Kawamura posted screenshots of portions of a brokerage account statement on her Twitter account, which many of her investors followed, that suggested that she was obtaining incredible returns in her own brokerage accounts. In fact, the screenshots reflected particular returns on unusually successful trades and/or trading days from her boyfriend’s brokerage account and were not indicative of the performance of the trading in her account.
Kawamura’s website contained numerous material misrepresentations and omissions that she acknowledges were intended to attract subscribers. Kawamura claimed on the site that she had “been in the Investment banking industry for nearly a decade, specializing in Wealth Management for a major Financial Institution.” At the time she created her website, Kawamura knew this was false. She has never worked in the investment banking industry and has never worked for any financial institutions.