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Trust is at the root of many Wall Street deals.

In finance, having the right credentials – like degrees from top schools, experience at an A-list hedge fund, and spending summers in the right Long Island towns – has always been a proven way to pass through many of the industry’s key filters.

It’s often enough to get into circles where investing or donating is just a friendly social gesture – an approach that has worked for philanthropists, hedge fund newcomers, and even scammers.

Vlad Artamonov must have understood this to the core, telling prospective investors, many of them his former classmates from Harvard Business School, that he’d discovered a hidden way to learn which stocks Warren Buffett was buying early, an edge that would make him a lot of money on what later revealed itself as a whirlwind Ponzi scheme.

The HBS graduate tricked his fellow alumni and associates into investing at least $2.9 million in a Ponzi scheme he ran, New York Attorney General Letitia James noted via CNBC.

Artamonov, now 45, has subsequently been blocked from further “harming investors through his fraudulent scheme,” which allegedly projected returns of 500% to 1,000% by claiming to learn which investments Berkshire Hathaway planned to make.

“It is really a ridiculous information arbitrage,” he told an investor, per Intelligencer. “Basically getting tomorrow’s newspaper today. Literally having a private time machine.”

After being scammed recently myself, a huge lesson is always when it seems too good to be true, that’s because it damn well is.

Image: Intelligencer

Artamonov allegedly lured at least 30 investors into the scheme over two years, most of whom he met through his connections to the elite college. Artamonov graduated from the business school in 2003 with a master’s degree, and in addition to his Ivy League credentials, had spent more than five years at Greenlight Capital, the highly regarded activist hedge fund run by David Einhorn, a self-described admirer of Buffett.

One of Artamonov’s buddies who got scammed doubted it all the way up until the end, wondering “There’s no way Vlad would be running a Ponzi scheme, right?” when he was starting to really worry.

“Why would he risk his reputation? It’s a small amount of money, it’s not rational — why would he put his career on the line?” they reasoned. “I think you give a friend the benefit of the doubt.”

The NY authorities were onto Artamonov when an investor ended his own life after discovering he had lost $100,000 in this alleged scheme.

Even after the man’s suicide, Artamonov continued soliciting new investors, lying to them about the fund’s strategy and performance, James said in a statement.

“Even sophisticated investors can be conned by fraudsters, especially when personal relationships and networks are used to build a false sense of trust,” James said.

“Vladimir Artamonov used his alumnus status from Harvard Business School to prey on his classmates and others while seeming legitimate and dependable. Instead, he has been scamming people out of their investments, with horrific consequences.”

James’ office said that from September 2021 up to the present, he solicited at least $2.9 million from at least 29 investors for an investment fund dubbed ‘Project Information Arbitrage’ or the ‘Artamonov Fund’.

Soon after the friend who’d invested learned about the scam, he was talking to one of the Attorney General’s investigators. “Were you aware,” the investigator asked him, “that one week after the investment, your money was already lost?”

Indeed, Artamonov used the investors’ funds to purchase short-term options which expired within days of purchase “and appeared to have no relation to Berkshire Hathaway or its investment activities”.

While Ponzi schemes are a classic form of white-collar fraud, Artamonov is not currently facing criminal charges, and there is no warrant out for his arrest.

Gosh, aren’t those pearly Harvard Business School gates the cleanest launching pad for white-collar crime?

[sources:cnbc&intelligencer]