Sophisticated Investors Are Not Immune To Being Defrauded

Sophisticated investors are not immune to being defrauded. A perfect example of this is the experts at JP Morgan did not even pick up on the fact that they had been defrauded until it was too late, according to Bloomberg. By virtually every standard, they would be considered the most sophisticated of all investors.

Here is how it all unfolded. Lehman Brothers established a company called Fenway capital to act as a receptacle for questionable real estate deals. Hudson Castle Group, a leading provider of debt financing solutions sponsored the company and Fenway proceeded to issue commercial paper rated P-1/A-1 by Standard & Poors and Moody. Lehman then bought $3 billion of the commercial paper issued by Fenway and used it as collateral that was accepted by JP Morgan in their role as clearing bank. Lehman then ended up with $3 billion in cash for the depreciated real estate. JP Morgan is suing Lehman for the worthless commercial paper dubbed “goat poo” by Lehman insiders.

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