That isn't precisely a kiting scheme, but it's pretty close. It's actually a computer fraud case. It depended on the technology of the time (the 1970's, I believe). He had a printer friend print cheques with the logo of the New York bank, but the bank identifier in the MICR code at the bottom was for a California bank. Those cheques went back and forth between the two Federal Reserve districts for months before the scheme was uncovered, by which time the perpetrator was long gone. Classic kiting is what brought down broker E.F. Hutton (remember their ads, "When E.F. Hutton speaks, people listen"?). This company was extremely old, dating back to before the 1907 California earthquake, and had a great reputation for honesty - at least until they got caught. It died ignominiously in the early 1980's. The guys running the scheme within the firm would scour the States for obscure little banks where the cheques would remain in the float as long as possible. It was quite the scandal at the time. His Lordship Mayhem -----Original Message----- From: owner-tlug-lxSQFCZeNF4 at public.gmane.org [mailto:owner-tlug at ss.org] On Behalf Of Peter Hiscocks Sent: Tuesday, December 09, 2003 12:04 AM To: tlug-lxSQFCZeNF4 at public.gmane.org Subject: Re: [TLUG]: Kiting: ( was *Really* bad week for SCO) I heard of one kiting scheme that was finally discovered when the magnetic ink on the cheque wore down to the point that it could no longer be read by the cheque-reading machines and had to be handled by a human. Apparently the cheque had been going back and forth across the continental US for several weeks before that happened. Peter On Mon, Dec 08, 2003 at 11:52:49PM -0500, Gary Layng wrote:
I think I can google something up, but for now: - kiting is illegal. The scheme depends on how long it takes cheques to clear the central clearing facility that all banks share. Imagine you have two bank accounts with, say, $50 in each. You cut a cheque from your account in Bank 1 for, say, $5 million, and deposit it into the account you have in Bank 2. At the same time you also cut a cheque from the Bank 2 account and deposit it into the account in Bank 1. When the cheques clear, you have enough money to cover them. You get the interest on the $10 million dollars you had for two-three days in the two accounts. - Margin is perfectly legal. "On margin" means that you borrowed money from your broker to buy shares. Typically the broker lends you up to about 75% of the value of the shares. If the value of the shares drops 25% you get a "margin call" and they can sell the shares. You're leveraging your potential capital gains by borrowing the money, but it's quite dangerous.
His Lordship Mayhem
-----Original Message----- From: owner-tlug-lxSQFCZeNF4 at public.gmane.org [mailto:owner-tlug at ss.org] On Behalf Of Byron Sonne Sent: Monday, December 08, 2003 7:30 PM To: tlug-lxSQFCZeNF4 at public.gmane.org Subject: Re: [TLUG]: *Really* bad week for SCO
its stock price may jump to $50, and if you hold -100 of them, you'll now have to pay $5000 to close out your position, and you're in the hole big time.
Does anyone have a link to a site or some docs that explain, to a putz like me, what all this various financial wizardry is?
I've seen shorting briefly explained here, but what about kiting, selling on margin, etc, and various other techniques and scams? I'd like to know but I don't have the inclination to read entire books about this stuff, or become a CPA or something.
Later, B -- The Toronto Linux Users Group. Meetings: http://tlug.ss.org TLUG requests: Linux topics, No HTML, wrap text below 80 columns How to UNSUBSCRIBE: http://tlug.ss.org/subscribe.shtml
-- The Toronto Linux Users Group. Meetings: http://tlug.ss.org TLUG requests: Linux topics, No HTML, wrap text below 80 columns How to UNSUBSCRIBE: http://tlug.ss.org/subscribe.shtml
-- Peter D. Hiscocks Department of Electrical and Computer Engineering Ryerson University, 350 Victoria Street, Toronto, Ontario, M5B 2K3, Canada Phone: (416) 979-5000 Ext 6109 Fax: (416) 979-5280 Email: phiscock-g851W1bGYuGnS0EtXVNi6w at public.gmane.org URL: http://www.ee.ryerson.ca/~phiscock -- The Toronto Linux Users Group. Meetings: http://tlug.ss.org TLUG requests: Linux topics, No HTML, wrap text below 80 columns How to UNSUBSCRIBE: http://tlug.ss.org/subscribe.shtml -- The Toronto Linux Users Group. Meetings: http://tlug.ss.org TLUG requests: Linux topics, No HTML, wrap text below 80 columns How to UNSUBSCRIBE: http://tlug.ss.org/subscribe.shtml