Fake Sydney office part of alleged US Gryphon scam

Date: Wednesday, June 23, 2010
Author: Sydney Herald Sun

WITH slick promotional materials boasting a global network of offices in Sydney, London, Chicago and Wall Street plus a glowing endorsement from billionaire hedge fund guru George Soros, financial advisory company Gryphon Holdings appeared to be a place for investors to make a windfall from hot stock market tips.

"Alone the traders of Gryphon Financial are incredible, together they are unstoppable," Mr Soros said.

Retirees thought Mr Soros was responsible for the glowing endorsement.

The reality, according to US prosecutors, was Mr Soros never uttered the words.

Gryphon Holdings also was not a global financial business with offices in Sydney, London, Chicago or Wall Street and a hedge fund holding more than $US1.4 billion ($1.61 billion) but, according to the prosecutors, was a sham operation run from a strip mall on New York's unfashionable Staten Island.

Instead of Gryphon Holdings being run by graduates of esteemed universities Harvard, Oxford, Columbia and Wharton and former employees of Lehman Brothers and Goldman Sachs, it is alleged the operation was run by shysters, led by 43-year-old Kenneth Marsh.

The fake business did make a windfall, but not for the elderly retirees and other investors tricked into handing over more than $20.1 million to the company.

Benton Campbell, US Attorney for the Eastern District of New York, and Ronald Verrochio, inspector in charge of the US Postal Inspection Service's New York division, allege Mr Marsh and 13 others pocketed the cash by duping victims in the "fraudulent scheme".

"Fair capital markets depend on the protection of the small investor, and we will vigorously investigate and prosecute operators of fraudulent investment advisory schemes that seek to prey on their clients," Mr Campbell said.

It is alleged Mr Marsh and his 13 co-accused, charged with conspiracy to commit securities fraud and wire fraud, contacted victims with unsolicited emails and telephone calls touting the firm's services and directing them to its website.

The alleged scam began in January 2007 and ended in April this year.

Victims were offered subscriptions to investment newsletters for between $113 and $1.14 million in which Gryphon provided customers with "specific trade recommendations".

The defendants are also accused of selling stock and option advice ranging in price from $1144 to $57,227.

"The defendants and Gryphon's promotional materials also claimed that the firm had working offices in Chicago, London, and Sydney. In fact, no Gryphon employees worked from such offices," the indictment states.

If convicted, the defendants each face a maximum sentence of 20 years' imprisonment.