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Morning Coffee: The mystery of the schmoozing $32m banker conman. The great hedge fund comeback

Avery Stone

As any senior banker knows, networking is key to making the right connections and progressing up the ranks. Avery Stone was a master schmoozer and knew just about every senior financier in Hong Kong – and he managed to dupe them all.

Quite how he managed to convince well-heeled investment bankers to part with $32.5m and believe that his company Global Merchant Funding (GMF) Ltd was a solid investment – when actually it never turned a profit – before promptly doing a runner, remains a mystery.

GMT was a cash-advance business – which lends cash to local businesses in return for a cut of future credit card receipts – and, in theory should have been producing double digit returns. In fact, its accounts suggest, it posted a loss every year from 2010-2014.

As Bloomberg reports, it’s not the amount of money that is shocking, but more the depth of Stone’s rolodex. The likes of Gokul Laroia, CEO of Morgan Stanley ex-Japan, Peter Tattersall, chief operating officer for fixed-income sales in Asia with Morgan Stanley were among around 80 other senior bankers who invested, none of whom saw the risks of investing in the company.

“This isn’t a deal that went bad, these guys systematically preyed off their friends,” said Thomas Gallagher, one of GMF’s investors. “The fact of the matter is, these guys essentially were in our circle.”

Schmoozer or not, earlier this year Stone borrowed $89k from his 82-year-old father, Richard, to “get out of Hong Kong very fast” before stealing $400k of family possessions and disappearing.

“He’s a crook, ok? You can quote me on that,” said Richard Stone. “He’s lying low, because he’s a low-life.”

Hong Kong police are investigating.

Separately, after months of losses and job cuts at large, macro-focused hedge funds, there’s been a turn of fortunes. Caxton Associates gained 5.1% last month, Brevan Howard is back in the black and Tudor Investment Corp – which is cutting 15% of its workforce – also reversed losses and is up 2.1% in October.

If this sounds like good news, it’s also worth noting that quant-driven hedge funds – the success story of 2016 – had a terrible month, says the WSJ.

Meanwhile:

Swedish investment bank Carnegie left the UK just before Brexit and won’t be coming back. “We had equities and corporate bonds in Britain before the vote. We started selling off our U.K. holdings to absolute zero maybe a month before the vote.” (Bloomberg)

Barclays is sub-leasing the equivalent of 5,000 desks in its London office, largely as a result of its hiring freeze (Bloomberg)

Nomura is hiring in research! Mark Doms has joined as a managing director and senior economist in the U.S. (Reuters)

UBS and BlackRock veterans have launched a new bitcoin start-up (Trade News)

KKR has hired Timothy Franks as head of consumer and retail for Europe, the Middle East and Africa (Financial News)

Wall Street is still the U.S. election punchbag (WSJ)

A former SAC Capital Advisors trader is employing 230 researchers engaged in “intense and tedious” data collection in Pakistan, where labour is cheap, for a data focused hedge fund (Institutional Investor)

PJT Partners is struggling with the M&A slowdown (Financial News)

Brokers – the highest paying job in the UK, apparently (Business Insider)

Millennials are getting prenups for ideas that don’t yet exist (Bloomberg)

Use Facebook, live longer (New York Times)

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