Sayonara, Suckers: Japanese Ponzi Scheme Revealed

by J. J. Kellington on March 1, 2012

The world loves to emulate America; clothes, rock music, rap, iPods, Facebook and now Ponzi Schemes.

Japanese financial regulators suspended an obscure money management firm, AIJ. The closure was due to the alleged disappearance of $2 billion.

The magnitude of the loss by a relatively unknown Tokyo asset management firm highlights the weakness of Japanese regulators.

“Our profits will not depend on rises or falls in the market,” Kazuhiko Asakawa said of his firm, AIJ Investment Advisors Co. “We will achieve our goal through a strategy that employs highly sophisticated financial technology, selling high and buying low.” Sounds very Bernie Madoff-esqe, doesn’t it?

Japan’s financial watchdog said investigators are aggressively scouring leads into the whereabouts of “most of” the 183 billion yen in pension-fund assets managed by AIJ Investment Advisors Co (we like using yen since the amount sounds so much bigger than dollars).

Details were not provided giving the exact dollars lost and the number of clients impacted by AIJ.

Japanese regulators conducted only 15 inspections of investment managers last year. AIJ was not one of the firms examined.

The company claimed that it had cumulative returns as high as 240%. Japan’s Nikkei daily reported that AIJ may have misled clients for years.

The scandal comes at a bad time for regulators since it happened so quickly after the camera-maker Olympus Corp. admitted to it successfully hiding more than $1.5 billion in losses for 13 years.

There is someone who is happy about the schemes coming to light; Securities and Exchange Commission Chairperson Ms. Mary Schapiro. One can almost hear her say “thank god it happened in Japan and not in the US, otherwise I would never get my new budget from Congress.”