Investigation by the securities law firm of Chapman & Associates determined that Michael J. Park, a registered representative with 1st Discount Brokerage, claimed to be a very successful stock trader. He made representations to investors regarding his past successes in trading securities and claimed to consistently generate high returns on his customers’ investments.
Park created all the appearances of a successful stock broker: he brandished an expensive life style, living in a posh mansion and driving expensive cars. However, unbeknownst to his investors, the money he used to pay for his life style came not from his trading profits, but from the funds deposited by his victims. Park’s operation – Park Capital Management Group – was nothing but a pyramid scheme.
Contrary to the façade of success he carefully built, Park had been consistently losing money in the stock markets, and had squandered the investor funds to buy luxury items for personal use. The supposed “profits” that were distributed to earlier investors came from deposits by later investors, as in any Ponzi scheme.
Park could perpetrate his investment scam only so long as new investors deposited money with him, according to John S. Chapman, a securities attorney. When the flow of money slowed down, he became unable to pay the promised returns to earlier investors, and his scheme collapsed, leaving victimized investors with nothing but fictitious account statements and paper profits. Park recently filed for bankruptcy.
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John S. Chapman determined that Park was able to perpetrate his scheme for so long as a result of 1st Discount Brokerage’s failure to properly supervise him and prevent him from deceiving the investors. Chapman noted that, while Park is probably insolvent and unable to pay back all investors, 1st Discount Brokerage is likely to be liable for failing to stop Park from perpetrating his pyramid scheme.
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