Bronte Sleuth Finds Ponzi Link To Biden

Bronte sleuth finds Ponzi link to Biden

http://business.smh.com.au/business/...0511-b0le.html

Jamie Freed
May 12, 2009

JOHN HEMPTON, a former Platinum Asset Management banking analyst-turned-financial blogger living in Bronte, would at first glance appear an unlikely candidate to uncover a financial scandal linking US Ponzi schemes to the offices of a hedge fund owned by the son and brother of the US Vice-President, Joe Biden.

But Hempton - self-described as a political left-winger who took joy in attending the victory party for Maxine McKew after she unseated the former prime minister, John Howard, at the 2007 election - has become a blogosphere star after his detailed investigation into the New York hedge fund-of-funds, Paradigm Global.

Bored and having left Platinum, he launched his blog, Bronte Capital, last May.

While in funds management, Hempton had recommended short-selling major financial stocks, but like many who had the same good idea, he was too early and the costly positions were pulled before the onset of the global financial crisis.

With his online musings, Hempton started by examining the balance sheets of troubled banks, like the Royal Bank of Scotland, and then dissected the economic situation in Eastern Europe by analysing the price of prostitutes, gathering about 6000 global subscribers along the way, almost all of them outside Australia.

Later he began investigating a US hedge fund salesman with a history of marketing what he politely deems "scuzzy product", including Ponte Negra, an alleged Ponzi scheme accused of fraud by the US Securities and Exchange Commission.

To Hempton's great surprise, he found the salesman, Jeff Schneider, also worked for Paradigm, which is owned by the Vice-President's son, Hunter Biden, and his brother, James Biden, and operated from the 17th floor of 650 Fifth Avenue in Manhattan - an office tower with a colourful past which has housed the disgraced arbitrageur Ivan Boesky and the Glencore founder Marc Rich.

Ponte Negra shared an office, phone number and common marketer (Schneider) with Paradigm. "I found it by accident," Hempton says.

"I fell out of my chair."

As he would soon discover through more research, this was not the first time Paradigm's name had been linked to the seamier side of finance.

Before the Bidens took ownership, it was associated with a Canadian fund that was later discovered to be a Ponzi scheme.

And after the Bidens took over, it launched a joint venture with the cricket-loving Texas billionaire Allen Stanford's outfit, called the Paradigm Stanford Core Alternatives Fund.

Hempton is at pains both online and in conversation to say he is not alleging the Bidens are crooks. Though he says their due diligence - before buying the fund and in its oversight of sales staff afterward - was sloppy. "There is no question that they housed within their doors a Ponzi, a fraud," Hempton says.

Paradigm's links to Ponte Negra have received relatively little attention by the mainstream media, save a series on the Financial Times website.

Hempton says he can understand that, since in one sense there is no evidence to suggest that Joe Biden has had any involvement with Paradigm.

But he adds that in another sense, it is a story that typifies the economic situation.

"You have a financial crisis that is ultimately caused by a lack of trust," Hempton says.

"If you can't trust a financial institution, it goes bust. People very close to the seat of power didn't show themselves to be very worthy of trust."