The safety and security of your trading funds


Active member
129 11
This is an interesting article from Ann Barnhardt (courtesy of who has been warning about this for months.

Do you remember how I told you about the Ponzi scheme that imploded in 2007 called "Sentinel Management Group" that stole over $500 million in customer funds? The NFA was the auditing regulator of Sentinel, and the NFA admitted after the Sentinel Ponzi imploded that they signed off on their audits even though the NFA claimed not fully understanding Sentinel's books or accounting methods. In other words, the NFA didn't really audit Sentinel at all - they just PRETENDED to audit them, drew up some forms, had some robosigners sign off, and then just hoped that when the **** hit the fan, everyone in the industry would be so terrified of the NFA that no one would hold the NFA accountable for their criminal malfeasance - or even talk about it.

Sentinel took customer segregated money and fraudulently used it as the collateral on a loan from Bank of New York Mellon for $312 million to fund their own in-house proprietary trading operations. When the Sentinel Ponzi collapsed, BNYM sued to go to the front of the line of creditors - ahead of the customers of Sentinel whose money was fraudulently used as collateral, which has now been "linguistically sanitized" into the word "hypothecated".

The federal appeals court ruled yesterday that not only does BNYM stay at the front of the line, but that using customer segregated funds as collateral is NOT a crime, and that co-mingling customer segregated funds with proprietary funds is NOT fraud.

Here is the Reuters piece.

Read this quote from the ruling, which is, in essence, the entire financial market paradigm being guillotined:

"That Sentinel failed to keep client funds properly segregated is not, on its own, sufficient to rule as a matter of law that Sentinel acted ‘with actual intent to hinder, delay, or defraud' its customers". (U.S. Circuit Judge John D. Tinder)

What this means is that even if Jon Corzine is somehow dragged into court by private citizens, because you know damn good and well that the Justice Department will never, ever touch him, Corzine now has a legal precedent, likely from a bribed or otherwise coerced Federal Appeals Court, explicitly stating that an FCM can use customer deposits to pay its debts, and that the customers themselves are subjugated and have basically no legal right to their own monies, no matter what the law says, or what legal assurances, claims or guarantees are made to that customer about their funds held with an FCM or any other brokerage or depository institution. The "secured" party at the front of the line will always be the mega-bank who made the fraudulent loan using the stolen customer funds as collateral.

In other words, all customer funds in the United States are now the legal property of JP Morgan, Goldman Sachs, BNYM, or whichever megabank is the counterparty on the loans the FCM or depository institution takes out in order to fund its mega-levered proprietary in-house trading desks.

For the love of God, I don't know what more there could possibly be to say to snap you people out of your normalcy bias trance. You have GOT to get ALL MONIES out of the financial system NOW. This ruling sets precedence for every depository institution, not just futures brokerages. It is now legal in the United States for any financial institution to steal customer funds, borrow money against those funds for the uber-levered proprietary trading use of the financial institution, and the customers have ZERO CLAIM TO THEIR OWN FUNDS once they are in the custody of the financial institution.

The court has ruled that once your money passes out of your PHYSICAL POSSESSION, and I mean PHYSICAL possession, it is no longer yours, and you have no legal claim or legal recourse to it when it is stolen. This includes BANK ACCOUNTS. Money in a bank is in the possession of the BANK, not you. Do you comprehend this? The entire system is utterly devoid of any integrity or genuine security and is breaking down catastophically before our very eyes. You HAVE to comprehend that your money sitting in an account is no longer legally yours. You have to force your brain to process and comprehend this, no matter how incomprehensible it may seem. IT IS OVER. This is Marxist hell. We have arrived.

This ruling and precedent will be used by every brokerage, every bank, every insurance company and every pension fund to deny you your money when the financial system finally collapses, be it on Monday, or be it two years from now.

Anyone with sizable funds at a brokerage is now well warned to minimize any potential capital losses from brokerage closures in the future.


Experienced member
1,421 179
Good Lord, but does ZH ever post something positive? It's all a bunch of fear-mongering.

Just be smart with your money. Don't put it all in one place. Keep some funds under the mattress, or in another asset form. Knock on wood for the rest.


Senior member
2,690 276
She has a point, but the way she gets it across is idiotic. Accusing a Federal Appeals court of being bribed or coerced without any evidence whatsoever is utter foolishness. Moreover, her wild generalizations are laughable. In general, judging from her previous comments on these issues, she appears to have an agenda. We all know that ZH has one.

The Leopard

Experienced member
1,877 1,020
she appears to have an agenda. We all know that ZH has one.

I don't read it, only glanced over a few articles which I have not found to be particularly impressive (in the favourable sense, at least).

Could you expand a little, please? What is ZH's agenda?


Experienced member
1,421 179
ZH is a site that's become incredibly popular with 20-somethings following the 2008 crisis. The site's creator calls himself Tyler Durden after Brad Pitt's Fight Club character, and was supposedly affiliated to some Hedge Fund prior to ZH.

The site's MO is to air out all the things wrong with the system and "inform" the general populace as to what goes on. In reality, TD posts a bunch of ultra-pessimistic views and spins news to make it sound negative. There is some good stuff in there and they have aired out some issues, but it's all twisted into some sort of marketing campaign. TD might know what he's talking about, but he makes no concessions to the uninitiated. It's like he purposely posts jargon-heavy articles for the wow factor.

Besides, the comments are some of the most moronic I've seen on the 'net. No one knows what the hell this guy's saying, but commenters act as if they do.

Anyway, that's all I know about the site. Maybe there's more, but I frickin' hate the site so that's as far as I'm willing to dig. :mad:
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Senior member
2,690 276
To expand a little on what VielGeld said...

Firstly, maybe "agenda" isn't the most appropriate word. "Bias" is more like it.

ZH distinguished themselves with the coverage of the subprime crisis and all the shenanigans around it. Their commentary around the various wrong-doings in that market was more or less accurate and offered real insight. Many others had useful things to say, so one could claim that ZH was picking low-hanging fruit. Regardless, they did a good job and really made their name on subprime. In fact, they were so wildly successful that they decided that the magic formula didn't have anything to do with accuracy, facts or insight. Instead, they concluded that all they needed to sell was good ole "shock 'n awe" and the general paranoid message that "the man is keeping me down". So nowadays, in order to sell this message, which is especially popular with a certain fringe, the good folk at ZH don't let facts get in the way. So now ZH is a place that is simply not worth visiting, 'cause it's just really too difficult to separate the bias from the substance (which is undoubtedly sometimes to be found on ZH).

Liquid validity

0 0
ZH is bo11ocks, spin and fear.

Sentinel ruling may hurt MF Global clients | Reuters
Bank of New York Mellon Wins Appeal on $312 Million Lien - Bloomberg
Sentinel Management Chief, Head Trader Indicted in Illinois - Bloomberg
Sentinel Management Group Inc. : Articles :: Law360

Major creditor accused of being aware of loan collateral fraud, cleared goes
back to front of queue.

Meanwhile SMG CEO and head trader still up on 18 counts of wire fraud (20 yrs each instance).
There are no connections or implications for the MF Global case, although they
will doubtless be used.

Not sure what the fuss is about, company hits the wall, small punters are always
at the back of the queue, same as it ever was.
If you believe in, or rely on NFA regulation, god help you.
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