Investment bankers in Hong Kong were tricked out of millions of dollars by a cash-advance business called Global Merchant Funding (GMF).
According to Bloomberg, smooth-talking fraudster Avery Stone and his partners at GMF convinced bankers from prominent international banks to invest in the business to the tune of $32.5 million before disappearing.
“This isn’t a deal that went bad; these guys systematically preyed off their friends,” Thomas Gallagher, a GMF investor, told Bloomberg. “The fact of the matter is these guys essentially were in our circle.”
According to a person familiar with the matter, the company used a strategy of providing cash advances to local businesses in exchange for a portion of their credit card receipts.
GMF used the prospect of big returns with little risk, which can be associated with the cash advance business, to attract investors. Once the company was seen bringing on board high-profile investors, even more wanted to sign up.
“You get on the bus, and it’s all rich, smart guys, and we all think someone is driving, but everyone’s just taking a nap in the back,” former Citigroup banker John LeFevre explained.
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JLA Asia, the liquidator of GMF, confirmed that the company posted a net loss annually from 2010 to 2014 — with the deficit growing to HK$123 million ($15.8 million).
