I’m all about following the smart money, especially in this environment, and sometimes I come across some interesting cases.
There’s one that caught my eye because it was a $100M heist no one saw coming…
And affected thousands of people, and the paper trail all led back to one person.
The reason I shed light on this is because I see massive bets in the options market, and I’ve realized how easy it is for me to generate trade ideas just from following where the money goes.
By analyzing these cases, I try to see how the “smart money” thinks… and over time, it helps me get better at following the money trail.
That said, let’s see how this one man committed a $100M fraud and what it is he did.
Thousands affected across the U.S. and millions upon millions lost.
It all comes back to one man’s scheming and a bag of tricks. But unlike great magicians, his secrets were revealed.
… An unveiling that had him throwing himself at the mercy of the court. Pleading guilty to a $100 million fraud.
Michael Mann ran ValueWise Corp, a subsidiary of MyPayrollHR.com.
When his scheme imploded thousands of people were left without paychecks. Checking their bank account only to find a negative balance staring back at them.
And to top it off victims were left with an unpaid tab for Uncle Sam for overdue payroll taxes.
This all started back in 2013.
How It All Started
Mann started to draw in and create companies for his company ValueWise.
But Mann was whipping together bogus invoices that showed his businesses (some that were not even real) as being owed millions of delicious dollars in revenue for consulting services.
Mann would take these invoices and work them to his advantage.
Using them to get multiple million-dollar loans from several finance companies. Using these fake invoices as collateral, the equivalent of having a unicorn as a cosigner.
But to get these juicy loans Mann needed more than invoices.
He needed a little thing called verification.
A company that could verify that they used his consulting services and owed him millions in fees.
Did man go out and find a legit customer to generously shower with his services? Heck No!
He borrowed the name of a Minnesota health insurer’s subsidiary, Optum. Something Optum was totally unaware of.
Mann hired an Optum employee who would soon become one of his partners in crime.
It was this new face that led Mann to his #1 partner in crime, Luke Steiner.
Luke would be the man who would verify not one, but two of Mann’s invoices.
Mann would even pretend to be Luke. Using a fake email to get yet another loan from a new financer.
Bet you are wondering what Luke got out of all this?
Well, for the part he played he received only $11,300…… in Amazon gift cards!
Mann soon found himself unable to repay his lenders…
And someone must have thrown this guy a shovel because when he realized he was in too deep this fool dug deeper.
He clung to a revolving line of credit he had with Pioneer Bank like a lifeline…. But this line of credit was only $2 million. Mann desperately needed more money.
So, Mann dug his playbook back out and started churning out fake invoices again. This time not just stealing Optum’s name but T-Mobile, Best Buy, and 3M.
And his magic show worked.
Pioneer boosted his line of credit from $2 million to $15 million in 2015.
Mann had painted his company so successful 2 more banks hopped on board to help Pioneer extend his line of credit. Inflating his credit line in August 2019 to $42 million.
At this point, the ole boy was doing a balancing act.
Using credit cards from Bank of America to pay his loans.
But this huge line of credit only gave him another big bill to pay.
He began to dip into his client, Cachet Financial Services MyPayrollHR payroll to pay his tab at Pioneer.
By siphoning funds from Cachet to his account he caused over 1,000 companies to come up short on their payroll. Causing thousands of their employees to receive exactly $0 on payday.
It would be Cachet that scrambled to right things. Having to pay $7.1 million worth of lost pay itself.
… The company has since been doomed to filing for bankruptcy.
He also dipped into MyPayrollHR and 1 other payroll firm, stealing $3.8 million to pay down his debt.
Court documents would reveal that Mann’s main goal was to continue to commit fraud to pay his insane loans. But he also funded a few ventures and covered the cost of running a business.
When his scheme imploded banks were left with tens of millions of dollars’ worth of losses due to Mann’s fraudulent activity.
But it would be Mann’s stooge Luke who was the first to plead guilty. He now could possibly receive up to 20 years behind bars for his crimes.
Ringleader Mann is an entirely different story.
Mann is required to forfeit $14 million from several bank accounts. A total of 30,000 shares in Pioneer Bank stock. And 1 Jeep Gladiator that he scooped up in 2019.
He has also agreed to repay over $101 million.
Mann since pleading guilty is looking at possible decades behind bars. A sentence that could have this 50-year-old stepping out of the big house, many years from now, looking like Father Time.
Listen, there are plenty of dirty players in the market… and sometimes, they hide their best bets in plain sight.
Let me show you how to identify them, and the strategy I use to legally steal trade ideas from some of Wall Street’s brightest players.