November 20, 2013
To make a sweater, you need a lot of yarn. To pull off a fraud, you also need a yarn -- but the type that involves unraveling a story that uses impressive sounding terms that few folks actually understand and the ability to keep a very straight face while you're counting the investment dollars from your pigeons. In this column, we present the lovely tale of an uber sophisticated computerized stock trading program. It must have been sophisticated because it doesn't seem that too many folks actually understood how it worked . . . and, in fact, there's quite a bit of doubt as to whether it either was utilized or, more to the point, whether it even existed other than in someone's fertile imagination.
All of which reminds me. I'm developing my own trading algorithm predicated upon the exponential vagaries of risk theory that incorporates the strategic factors of concomitant influxation of parabolic incursive paradigm perplexities, as promulgated by Doktor Watts Nieuw of the Neo-Fiscal School of Theoretical Structural Economics. Our backwards test in both Beta and Delta modes have yielded statistically significant results that are highly suggestive of epistemological verification assuming the diversion of minimal capital levels of support from a diverse risk pool amenable to unconstrained speculative parameters. So . . . can I put you down for a $120,000 unit in this investment?
DeHaan And His Trading Program
According to federal prosecutors, Benjamin Daniel DeHaan, 37, Decatur, GA, owned and operated Atlanta-based investment advisor Lighthouse Financial Partners LLC. Using videos that he posted on the company's website and YouTube, DeHaan presented a story about how he had developed the Quantplat software stock trading program to time purchases and sales of equities. As the investors' money rolled in, Lighthouse reached a high-water mark of about $6.7 million in assets under management.
Unfortunately, the whole spiel was a fraud and from January 2010 through May 2012, DeHaan allegedly converted over $2.5 million from some 114 investors. In keeping with the nature of these crimes, DeHaan diverted investors' fund to
purchase a new house in Memphis, TN;
purchase a partial ownership of a Memphis, TN, restaurant and bar;
fund an investment account in his own name; and
pay Lighthouse's overhead and operating expenses.
Consistent with such scams, DeHaan e-mailed fraudulent account statements to investors as part of his effort to prevent detection of his fraud - at best, it turned out to be merely a delaying action.
On February 01, 2013, DeHaan pleaded guilty in federal court in Atlanta to an Information charging him with one count of wire fraud, for which he faces a maximum sentence of 20 years in prison and up to a $250,000 fine. defrauding over 50 of his clients. United States of America v. Benjamin Daniel DeHaan, Criminal Information No. 1:13-CR-27-SCJ (N.D. Ga. Feb. 1, 2013). Read the criminal Information.
On November 18, 2013, DeHaan was sentenced to seven years and three months in federal prison, three years of supervised release, and ordered to pay $6,931,619.13 in restitution,
Bill Singer's Comment
For a bit more color for this story, I found this two-year-old blog posting:
Covered Calls In This News Driven Market
October 26, 2011
By Ben DeHaan:
This past Friday, numerous options expired after the market soared 267 points, resulting in the expiration of multiple covered calls in the money. The outcome being generous premiums paid to investors. Yet, the market remains news driven and is not suitable for the individual investors unless the positions purchased are protected using different option strategies. Many bottom fishers are trying to buy the pullbacks only to discover their purchases lose value with the next 200-point decline.
QuantPlat is making very interesting recommendations because opportunistic bottom fishers are purchasing good dividend paying stocks, expecting the market to be bullish from this point on. That is not a bad idea, but statistically speaking, the market can evaporate those purchases. QuantPlat regularly provides various conservative option trades. Entering a market, like ours at present, using options is a wise idea because they provide choices - let the options expire and keep the profit per contract or close the option and let the stock increase in value.
About Quantplat: Started by mathematicians acquiring software assets, Quantplat is a web-based system providing fundamental, technical, statistical tools, trading strategies, portfolio management, trade exit signals, generation, aid-in option adjustment and position hedging. QuantPlat, LLC is a combination of Ben DeHaan's background in portfolio management and construction using mathematical trading techniques and Letotech's expertise of developing and coding investment software as well as creating client relationship management systems. For more information please visit www.quantplat.com
About Ben DeHaan: Ben DeHaan is the President of Lighthouse Financial Partners, LLC based in Atlanta, GA. DeHaan has over ten years experience in financial management and has been advising individual clients on investment management with an emphasis on low-beta, low-risk investment vehicles. During the growth of his business, DeHaan developed the proprietary software Quantplat that uses mathematical algorithms to analyze stocks and ETFs and places stops and limits above and below stock purchases. Currently, Ben DeHaan manages five separate portfolio strategies under Lighthouse Financial Partners, LLC including The DeHaan Fund, LP.