NIR Group

[fudge_in_the_foot]

Madoff scandal tip of ice burg in world of seedy hedge funds


By Alan Fein

(AXcess News) New York - Bernie Madoff was considered a charmer and has even been called more knowledgeable of SEC regulations than the government watchdog itself. The investment advisor had even written the SEC in the late 90s, offering advice on catching scams in the financial community.

Madoff's Ponzi scheme bilked investors out of $50 billion, the largest fraud case to ever hit the financial community. Yet here it is December 2008 and Madoff remains free on $10 million in guarantees from friends of his after being arrested last week Thursday after his own sons called the FBI and turned him in.

Madoff was a Wall Street celebrity who was considered 'well connected'. To invest with "Bernie" was a privilege to some and bragging rights to others. But in both cases, those investors are singing the blues and will be lucky to see pennies on the dollar ever recovered.

New York securities lawyer Bill Singer said what will come out of this is a public outcry for more SEC regulation. "This is ultimately going to press Congress for more regulation and my fear is at the end of the day we're just going to have more unworkable rules on the books with too few regulators to enforce them," said Singer.

Much of the witch hunt brewing on Wall Street is being aimed at the unregulated world of hedge funds where you hear little about the smaller companies who've been driven out of business by alternative investment fund managers who use such financial instruments as convertible notes which if the share price drops can be converted into more shares, creating an ever-downward spiral of dilution.

One such fund manager has even generated so much interest in his investment activities as to warrant a board be setup about him and his company on www.investorhub.com. According to that Board, Mr. Corey Ribotsky heads up NIR Group, LLC which operates as a management consulting firm, though the Company's website promotes itself as an investor "along side our limited partners".

Like Madoff before him, Ribotsky is a member of numerous philanthropic organizations, according to NIR Group's background outline. While Madoff used his country club connections to bilk investors out of billions, posts on the NIR InvestorHub board imply that Ribotsky carried out a similar MO to attract investors into NIR Group's host of funds.

Yet men like Ribotsky never make the press when compared to the Bernie Madoff's of Wall Street perhaps because the investors aren't big enough to matter to the New York Times, WSJ or others. Yet according to an October 22, 2008 story on hedge fund news publisher, FINalternatives.com, NIR Group has under management $7 billion.

A source told FINalternatives that the firm's AJW funds, which focus on small- and micro-cap companies' convertible securities, "are seeing very significant redemptions," forcing the firm to restructure the funds "immediately." The hedge fund news publisher quotes NIR Group as saying that it needed to restructure the funds "due to circumstances outside its control". Yet a search of public records indicates those 'circumstances' may be due to a rash of lawsuits from disgruntled companies who turned to Ribotsky's company for financing.

A January 26, 2007 story on Forbes.com about the seedy world of PIPEs implies that Ribotsky not only lacked ethics but seemed to take advantage of companies his group of funds invested in. Forbes' Nathan Vardi wrote about Ribotsky's ethical behavior saying, "His first business partner successfully sued him for stealing away their marketing and consulting firm. The florist at his wedding filed a $7,275 claim against him for failing to pay the bill."

Vardi's story went on to list a host of questionable investments NIR Group was involved in that included a similar MO to lawsuits filed following the release of that article all claiming that NIR Group allegedly destroyed those companies through short sales.

Some of the companies currently involved in lawsuits against NIR Group and Ribotsky include: Cyberlux (Otcbb: CYBL), Humitech (Otcbb: HUIT) and RG Global Lifestyles (Otcbb: RGBL). It's rumored that as many as 7 companies are suing NIR Group over its financings and more are considering litigation

So far, no criminal indictments have been handed down against Ribotsky and the press has rarely paid attention to his Funds' dealings, but with Madoff drawing high-profile attention from network news broadcasters, as Mr. Singer said, this is only going to draw Congress into pressing for more SEC regulations. Hopefully Singer is wrong in that there will also be more regulators to enforce them.

"It is a lawyer's axiom that bad facts make bad laws," says Singer. "As such, my fear is that the fraud and criminality of the Madoff scandal will prove to be so off the charts that Congress will feel compelled to hastily draft yet more unworkable rules and regulations. Ultimately, the Madoff affair is less one about too few regulations than it is about too few competent regulators. The tragedy of such high-profile cases is that they tend to leave two different sets of victims: 1. those whose lives were devastated by the crime; and 2. those honest businesses who become burdened by reactionary rulemaking. Unfortunately, there will be little sympathy for what remains of the hedge fund industry or the registered investment advisory community in Madoff's wake, and that is clearly understandable."
http://axcessnews.com/index.php/articles/show/id/17225