An irreverent Wall Street Blog
by Bill Singer
by Bill Singer
Honolulu Baby, Gonna Call Your Bluff
August 14, 2014
In comedy duo Laurel & Hardy's 1933 film "Sons of the Desert," the song "Honolulu Baby" made its debut. Some 81 years, lyrics to that tune would be an unheeded warning about a securities fraud shake-down and a scam artist's bluff:
When you shake it up and downYou shake a little here, you shake a little thereWell you got the boys going to townHonolulu baby, sure know your stuffHonolulu baby, gonna call your bluff
Knew Her Stuff, Worked Her Bluff
Keiko Kawamura of Honolulu, Hawaii, presented herself as an investment banker and hedge fund expert. Beyond merely cold calling folks by telephone, Kawamura engaged in an active online campaign whereby she solicited investors via Facebook, Twitter, and the whole social media thing that has become all the rage these days. Kawamura trumpeted her purportedly substantial financial industry experience, which included tales about her stock and options trading successes.
A Pair Of Twitter Lovebirds
If you visited her Twitter page, you may have been dazzled by a screenshot she had posted of brokerage account statements that purportedly demonstrated her ability to generate amazing returns. Except, well, the statements weren't actually from her account but were showing some isolated winning trades in her boyfriend's account, but, you know, its social media and, gee, WTF, right? Hers. His. I mean, c'mon, they were a couple and share and share alike. Don't be such a stickler for details.
20% Solution
Allegedly, from December 2011 through June 2012, Kawamura raised approximately $200,000 from at least seven investors for a hedge fund that she purportedly managed. She was looking for a 20% performance fee on profits. As far as looks go, that's a nice one! Give the lady credit. She was confident in her skills and expected to make a nice buck.
Sadly, it seems that Kawamura either took much of the investors' funds for her own uses or lost whatever she actually invested in options trading. Well, so much for giving her credit, and so much for confidence and expectations.
800% Gorilla
If that hedge-fund baited hook didn't attract you, in August 2012, Kawamura alleged launched kawamurafinancial.com, from which she sold her investment advice via subscription. Among her misrepresentations were that she had nearly a decade of experience, managed millions of dollars, and an impressive 800% return in her own account. Folks who bought into this pitch became website subscribers, paying a monthly fee of between $94.95 and $174.95. Why the difference in the monthly fee? Oh, well, you seek, you paid more for a higher level of access on the website. Yeah, sure, you got a more deluxer level of stock pickin' fabulousness.
Some 70 subscribers ponied up about $50,000 in subscription fees. Of course, FYI, Kawamura didn't have the claimed experience and the cited returns were bogus. Aw c'mon Bill, give the little lady a break . . . she probably just exaggerated a bit. Sure, a bit as in never having worked in the investment banking industry and never, ever having worked at a single financial institution.
SIDE BAR: See Keiko Kawamura's Social Media Sites (while they're still up and running):
- Linked-In Page: https://www.linkedin.com/in/kawamurafinancial
- Twitter Page: https://twitter.com/KawamuraFG
SEC Seeing Red
In light of Kawamura's alleged misconduct, the SEC instituted administrative proceedings alleging that she had willfully violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 20(4)-8. Although much is uncertain online, we do know that on August 5, 2014, the SEC accepted Kawamura offer to settle its charges, which she did without admitting or denying the findings. In The Matter Of Keiko Kawamura, Respondent. (SEC, Order Making Findings And Imposing Remedial Sanctions And A Cease-And-Desist Order, Securities Act Of 1933 Release No. 9622; Securities Exchange Act Of 1934 Release No. 72764; Investment Advisers Act Of 1940 Release No. 3888; Investment Company Of 1940 Release No. 31198; and Administrative Proceeding File No. 3-15826 / August 5, 2014).
In accordance with the terms of the settlement, the SEC ordered that Kawamura cease and desist from committing or causing any violations and any future violations of securities laws. She was also barred from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization; and prohibited from serving or acting as an employee, officer, director, member of an advisory board, investment adviser or depositor of, or principal underwriter for, a registered investment company or affiliated person of such investment adviser, depositor, or principal underwriter. Finally, she was ordered to pay $275,117.78 in disgorgement, $14,644.41 in prejudgment interest, and a $50,000 civil money penalty.
Bill Singer's Comment
BrokeAndBroker.com Blog readers know that I have little patience with and often less sympathy for investors who get fleeced by con artists like Kawamura. As often develops, those victims tend to do little, if any, due diligence; and, moreover, tend to demand little, if any, meaningful documentation to corroborate the fraudster's claims. Consider this revelation in the SEC's August 5th Order:
7. In soliciting investors for her "hedge fund," Kawamura told investors that she had extensive experience trading stocks and options and was managing millions of dollars in what she referred to as a hedge fund. In fact, as Kawamura knew, her only prior trading experience had been placing a small number of trades over the preceding few months in an account held in her boyfriend's name and less than $10,000 traded in brokerage accounts held in her name. At no time did her boyfriend's account in which she made trades hold more than $300,000 and at no time did accounts that she controlled and/or managed hold more than approximately $55,000.8. Contrary to Kawamura's representations to investors that she would invest all of the funds she raised in stocks and options, she misappropriated much of the hedge fund's money to pay for her living expenses and for luxury vacations to Miami and London. Of the approximately $55,000 Kawamura did invest, she pooled the money in one brokerage account and lost it all in highly risky options trades.
As is often the case with these scams, the individual running the bogus scheme does their best to keep the ruse rolling. In Kawamura's case, the SEC alleged that:
11. After raising money from investors through her misrepresentations and omissions, Kawamura engaged in further manipulative and deceptive acts as part of her scheme to defraud investors. Despite losing the money she invested, Kawamura repeatedly told investors that she was achieving excellent returns on their investments. Kawamura also created, and provided to certain investors, false tax documents that purported to show that she had invested all of the money she had raised when, in fact, she had misappropriated much of it. Despite losing the money she invested, Kawamura repeatedly assured investors seeking to withdraw their investments that she was achieving excellent returns on their investments and that she just needed additional time before she could process any withdrawals.
READ the FULL TEXT Order: In The Matter Of Keiko Kawamura, Respondent