Honig and Friends Sue John McAfee because they didn’t make enough money in MGT Capital deal

Barry Honig and others he invested with have filed a mudslinging breach of contract suit against the security company John McAfee is working with called MGT Capital. The lawsuit, filed in New York federal court yesterday names personally MGT president Robert Ladd, John McAfee and three of the company board members. The investor group (aka Team Honig *) is upset that, as third-party investors, a bridge loan they made to companies MGT was trying to buy didn’t turn into millions of cheap MGT Capital stock.

It’s hard to tell what parts of the lawsuit are fact-based or fancifully interpretations of events by Team Honig because they lost out making big money on a risky bridge loan. What’s most interesting to me is we see Barry Honig totally reverse course from his stance that he is just a passive investor. The lawsuit against MGT details multiple instances where Barry Honig, along with John O’Rourke, and John Stetson, are negotiating with MGT’s Ladd and McAfee to invest more money into the company dependent on an asset purchase agreement (APA) being executed.

The asset purchase agreement said MGT would buy McAfee’s cyber-security company D-Vasive and another cyber-security startup called Demonsaw founded by famed hacker Eric Anderson (aka Elijah). The purchase would mean shareholders in Demonsaw and D-Vasive would get millions of cheap stock in MGT Capital. On May 5th, Team Honig gave McAfee’s D-Vasive a $100,000 as a convertible debt to equity bridge loan in return for shares in D-Vasive, according to the lawsuit. A few days later the investors did the same kind of loan to Demonsaw for $750,000 converting shares in Demonsaw. If both companies completed a deal to be acquired by MGT Capital the bridge loan investors would get 8.8 million of shares in MGT as a result of their D-Vasive shares merging with MGT. For Demonsaw, it would be 10 million shares of merged MGT stock. Now for the bridge note investors to get the MGT shares they depended on the people who controlled the three companies to complete a signed deal and for new shares to be issued. It’s a typical vulture-style quick money deal that nets sophisticated investors like Honig, O’Rouroke and Stetson cheap stock for little cash out but it’s also risky because these investors aren’t suppose to be in control of the companies making the deal that would net them easy profits via cheap free trading stock.

When I read the Team Honig lawsuit against MGT, Ladd, and McAfee I got the impression that Team Honig had some kind of deal terms and control of the companies that would definitely get them MGT stock for giving loans to another company that MGT didn’t legally own yet…and now we know never will.

The lawsuit says

As with MGT’s acquisition of D-Vasive, the sole reason that Plaintiffs agreed
with Ladd, McAfee, and MGT to provide bridge financing to facilitate the MGT/Demonsaw
acquisition was to ultimately receive additional equity in MGT.

In my opinion that’s active investing not a passive investment as Honig, and his bulldog attorney Charles Harder, have previously said he does.

MGT will likely argue in response to Team Honig’s lawsuit the asset purchase agreement had run out of time and the contract was dead. Or that since the NYSE desisted them after the company got an SEC enforcement subpoena and wouldn’t’ approve the new shares as part of the D-Vasive/Demonsaw deal that there were terms in the contract that allowed MGT to back out of the asset purchase. Meaning there was a legal way out of the contract and they took it.

At the time of the McAfee loves MGT deal announcement, on May 9th, MGT was trading for less than one dollar. After the announcement that this penny stock was going to own a company founded by famed John McAfee, tons of main street investors bought shares in MGT and the stock shot up over eight times its trading price. MGT’s stock price was $0.48 per share on May 9 and rose to $4.15 on May 17, 2016, before settling generally in the $3 to $4 per share range through out the summer of 2016.

If the MGT / D-Vasive / Demonsaw deal had actually been closed the bridge note investors would have turned $850,000 in loans into MGT stock that could have been sold for $56.4 million (assuming 18.8 million shares sold at $3 share price). That’s one heck of a return on investment in a relatively short amount of time. And because none of these investors in the bridge loan to a private company owned more than 5% of the investment they didn’t have to tell The Street they would have owned this convertible stock and made millions. Additionally with all the new MGT stock issued investors who bought MGT on the hype of John McAfee’s involvement would have had their shares diluted.

What I think really happened here is Honig got in bed with two men (Ladd and McAfee), as street smart about how the market and deal making works as he is, and had the tables turned on him. Let’s not forget he filed a 13-G saying he also owned and sold MGT stock during the time the stock was flying high. The bridge loan stock he could have gotten if the deal closed was just extra money he could have made.

What’s ironic about this whole lawsuit is that at the end of last year Honig filed an anti-slaap libel suit against this journalist for 1)reporting he was named in an SEC lawsuit and 2) it was my opinion that the SEC was looking into the investing activities of people he invested with for trading as an affiliate without disclosing it. On February 1st 2017, at a federal court hearing in the Southern District of New York in front of Judge Paul G. Gardephe, Honig’s attorney Charles Harder (you know the slimball LA attorney that represented Hulk Hogan and has waged a war on journalist for his clients) told the judge when he was questioned how he came up with the legal basis that sentences in my reporting were defamatory against Honig “Yes, your Honor. Mr. Honig is a passive investor in stocks”. Then Harder went on to say “and one of these stocks is MGT”. There was short discussion, by Attorney Harder, about Honig not getting involved in the companies he invest in. Yet yesterday we see Barry C. Honig suing MGT and detailing, in my opinion, how active an investor he is.

Honig, without warning to my counsel, dropped his defamation suit against me a few days after that hearing.

The Team Honig lawsuit also details who Honig works with when making investments; something we rarely see in a public document. Honig through his attorneys usually claims he invest and works alone. Two of the men described as working with Honig in the lawsuit, Stetson and O’Rourke, are also named along with Honig in the SEC subpoena sent to MGT capital last year. In fact we see a text sent by O’Rourke to John McAfee literally speaking for Honig and detailing that Honig will make more investments in MGT if XYZ happens.

O’Rourke wrote back to McAfee, asking for confirmation of McAfee’s offer:
My understanding is that MGT will delist onto the QX or bulletin board and close the deal as originally agreed upon and voted upon by shareholders. In exchange, Barry [Honig] will commit to funding the company at $1.50/share

O’Rourke, who is younger than Honig, is the managing member of an investment firm called ATG Capital and has his office in the same building and the same room as Barry Honig in South Florida. Through interviewing people who have done deals with Honig I am consistently told “O’Rourke is Honig’s boy and acts at his direction”. Yet a paper trail of deals that both men invest in usually shows two separate corporate entities investing in the same company. This is how they claim they don’t work together and why it is difficult for a regulator to prove Honig is investing and trading as an affiliate group without disclosing it.

Here is a link to the lawsuit. Keep in mind you can write anything in a lawsuit and the plaintiffs have conveniently left out a copy of their bridge note contract. I asked Team Honig’s counsel at Susman Godfrey to clarify, and back up with documents, some of the statement of facts listed in the lawsuit but they have not responded to an email as of press time. MGT will be represented by Kramer Levin.

* Editors Note: I am using Team Honig to describe the plaintiffs in the lawsuit against MGT. The plaintiffs are: ATG Capital LLC, Four Kids Investment Fund LLC, GRQ Consultants Inc. Roth 401k FBO Barry Honig, Barry Honig, Jonathan Honig, Melechdavid Inc., and Stetson Capital Management LLC. These are not all of the 16 investors in the bridgenotes just the ones who opened themselves up to exposing their private trading records through discovery in a lawsuit.

4.6.17: This story has been updated

Elio Motors Trades Up but Main St Investors Couldn’t Get Shares Deposited

This story has been updated

Elio Motors IPO is still facing trading obstacles because thousands of mom and pop investors in the company can’t get the shares they bought in an equity crowdfunding campaign deposited with retail brokers. Since I first reported Elio’s troubles, on February 24th, at Growth Capital Investor the company told me it’s teamed with executives at OTC Markets to educate and encourage retail broker-dealers to accept the new kind of securities, created by the JOBS act, known as Regulation A+. But large retail brokers like Fidelity are telling investors they won’t accept the RegA+ shares till they see how the new type of securities trade for a month.

As a result, only institutional or high net worth individuals are able to get their shares deposited for trading, at the likes of Morgan Stanley, who is willing to take on the broker liability of new shares brought to market without the backing of an investment bank. Morgan Stanley will do this because they’ve already made so much in fees from these sophisticated clients that they can afford to take the risk for their best investors. The impact of Elio going first to list a RegA+ deal means the company’s share price has moved way above a realistic valuation because the number of investors with shares to trade and make a market is low.

The company, which is developing a high-mileage, three-wheeled car, raised $17 million from 6,600 investors under Regulation A+. They chose to list the stock for secondary trading on February 19 at OTCQX, the top tier alternate trading system available for emerging growth companies. It wasn’t till the fourth day that shares were able to start trading because of the share deposit issue. And those trades were only by people with millions in brokerage accounts or institutions that convinced their brokers to take the risk on these shares that actually got the first trades off.

As of end of day Friday Elio’s transfer agent VStock told the company only these broker dealers are now accepting the $Elio shares which included:
Morgan Stanley
Smith Barney
Charles Schwab
Merrill Lynch
Alpine Securities
Interactive Brokers
First Clearing
Bank of America
Scottrade (office by office decision)< strong>*
Fidelity (office by office decision)< strong>*

Elio could have avoided some of the share deposit problems for their investors if in the beginning they’d hired an investment bank like WR Hambrecht to run the RegA+ fundraising. This also would have meant the company had to pay more in fees to make the investing process smoother for their fan base. Or if they had brought in a one-of-its kind broker dealer BANQ early in the process they would have had an online system that got their investor’s shares deposited in only five minutes. Once again that would have cost Elio more in fees. Not a lot, but that’s dollars they can’t use to pay engineering to keep working on a mass production of its E-series motor.

As a result of not having all shareholders able to trade yet and make a market, we are seeing misguided headlines by a contributing reporter at Forbes praising the mini-IPO for a billion valuation only a week after trading began. Of course a company that has no revenue, says it needs millions more to finish producing its unique engine, only collects a small percentage of the car’s sales price for a reservation, is not worth a billion dollars. The Forbes reporter didn’t even bother to investigate why Elio went from listing at $12 to closing at $60 on Monday or report on the share deposit issue.

Today we can finally start to see a correction with $Elio down 33% closing at $40. But $40 still means, on paper, investors tripled their investment so far and regardless of the frustration many investors felt not knowing how to get their shares deposited the first week, this mini-IPO is very news worthy and important to watch. The trouble is investors are not getting insightful or accurate reporting from my fellow journalist trying to catch up on what RegA even means.

The trade publication I report for, Growth Capital Investor, has been covering how equity crowdfunding could dramatically change the face of start up investing and capital raising for well over a year. We will be reporting in-depth stories on how Regulation A deals get done and the markets response to this new capital raise vehicle for start-ups. If you plan to hold Elio shares for a long time I’d love to hear why you invested. If you want to be interviewed for my next story on Elio Motors please reach out to me at teribuhl@gmail.com.

UPDATE 3.11.16 – Elio investors say Scottrade is now returning their shares to vStock and has decided not to accept them for deposit. Scottrade would not comment on why they chose not to accept regA+ shares. Additionally, Wells Fargo is now accepting shares.

* UPDATE 4.7.16 – Yoel Goldfeder, CEO of VStock and the transfer agent for Elio, told this reporter in an interview for Growth Capital Investor Scottrade and Fidelity have now changed their mind about accepting RegA shares for deposit. He cautioned that each of theses large retail brokers are only accepting the shares through a branch by branch and investor by investor case.
I have reported a long-form deal analysis of Elio’s RegA+ offering in the April 5th issue of Growth Capital Investor. It’s a great read with insight on the success and learning lessons of the offering.

Fairfield Police Telling Friends Christopher Andrews was off his Meds Day of Killing

Neighbors and friends of a Fairfield, Conn. family who became victims to a fatal police shooting as a result of a domestic violence call say they are baffled why 51-year old Christopher Andrews would harm his family. But loose-lipped cops in Fairfield, Conn. are telling their friends attorney Christopher J Andrews had suddenly gone off his medication as one of the possible reasons for his erratic behavior Tuesday morning. Andrews,who did not have a gun, was shot dead by a 26-year veteran cop Sean Fenton. The CTPost backs up this theory and reported last night, according to unnamed sources, Mr. Andrews was depressed after the recent death of his mother.

According to two Fairfield residents I interviewed who spoke with a Fairfield cop, as Andrews was approaching Officer Fenton with a bloody knife he was crying, “I don’t why I am doing this”. The CTPost reported last night Andrews was wordless as he approached the officer according to their unnamed police sources. But these two residents, who spoke on the condition of anonymity, said that’s not what they were told by a Fairfield police officer.

The Fairfield attorney has been licensed to practice law in New York State since 1992 and earned his law degree from St. Johns University in 1990. It’s unclear what kind of law he practiced as a sole practitioner out of his small office on 420 Lexington Ave suite 300.

The New York Post found an outstanding tax lien of $16,737 against Christopher Andrews but did not say what state the lien was filed in. A search in Conn. UCC online database, that tracks liens, showed no liens filed against Christopher or Kathleen Andrews. The Andrews’ rented their 2,100 sq ft home at 22 Mount Laurel Road in Fairfield so the home couldn’t be used as collateral for liens.

Early Tuesday morning, Christopher’s wife and children were found with stab wounds and blunt force trauma when local cops arrived. Some press reports say the oldest son, age 15, said his dad came at him with a bat while he was in bed and he pulled it from his hands. His youngest son, age 12, and his wife Kathleen were listed in critical condition. The eldest son was seen carrying a bat on the front lawn when officers arrived. The son stopped approaching and put down the bat upon police command but his dad wouldn’t listen to Officer Fenton’s repeated request to thrown down the knife and stop approaching law enforcement. As a result Officer Fenton shot him dead.

The local and state police are not answering where Christopher was shot on his body or why the local cop didn’t shoot with the intent for a flesh wound to detain him.

Sean Fenton’s actions on the scene are being investigated by the state police and the assistant states attorneys office out of Stamford. His commanding officers have taken him off patrol duty but it’s unclear what police duties he is currently allowed to perform. Officer Fenton’s experience with active shooting scenes is also unknown.

Chief Gary MacNamara did not return phone calls and emails for comment on what Andrews allegedly told officer Fenton about not being mentally aware of his own actions right before he was shot. Investigators are also looking into how the medication Andrews was taking could have affected his cognitive and emotional state.

Calls to Christopher’s law office, Andrews & Andrews go to voice mail today. A request for comment was not returned at press time.

It’s unclear still what legal actions the Andrews family might take against the Fairfield police department for the death of Christopher.

Attorney Steve Seegar who has sued Conn. law enforcement for civil rights violations and wrongful death told this reporter when asked if the Andrews family has a case against the FPD, “It’s possible. I would have an out of state former law enforcement investigator on the case immediately and start preserving evidence. Why was a Taser not used and why isn’t FPD explaining this proactively in their press statements?”

Fairfield is an upper middle class town and not known for violence or ethic problems with its police force. Other Fairfield County towns, like Norwalk, have had to settle multiple lawsuits in last few years for wrongful police violence against the citizens they are sworn to protect.

The town of Fairfield and a domestic violence non-profit had tried to plan a town vigil for the surviving Andrews family members for Sunday but after a family lawyer Michael Meehan made press statements that the family wanted no part of the event it was canceled. Friends of the Andrews told reporters the family doesn’t want the tragedy labeled domestic violence because if was so out of character of Christopher Andrews, which leaves a lot of unanswered questions about truly sparked the violent behavior and if the prescription medication Andrews was taking played a role.

Casino Investors claim Hedgie Plainfield designed Equity Grab Scheme

Plainfield Asset Management is back in the news for their role in an alleged predatory lending scheme with a Colorado casino. I reported for Growth Capitalist this week investors in American Gaming Group sued the manager of Wildwood Casino for getting a sweet deal from hedge fund Plainfield to buy the millions in debt the fund held for a deep discounted price.

A breach of fiduciary duty claim was made because, Joe Canfora the casino manager hired by investors, allegedly bought the debt with equity warrants for himself with out telling the investors the opportunity was available. Canfora runs Merit Management and allegedly has a history of working with Plainfield and Innovation in the past. PFAM sale to Canfora put him in the lead as the top equity investor because of the warrants in the deal that enabled him to buy company stock for cheap. A move that shocked initial investors in the deal.

Growth Capitalist also highlighted the role of LA-Based Innovation Capital, run by Matt Sodl, who helped American Gaming Group raise over $50 million during the casino build out phase. One investor called the relationship between Innovation, Plainfield, and Canfora ‘the axis of evil’ because they felt the financial firms forced investors to put Canfora into the job who loaded it up with unnecessary debt and expenses. A move designed to make it a distressed company rip for a take over if you can buy the discount debt.

Plainfield, a once $5 billion fund run by Max Holmes, was forced to shut down and liquidate its investments early in the financial crisis. I previously reported for Greenwich Time and Dealflow Media that regulators and the Manhattan D.A. were investigating the fund for predatory lending along with securities violations. The fund managers have yet be charged with any wrong doing but did fight a bucket of civil lawsuits filed by small cap companies who borrowed money from them.

Canfora is believed to have not even put up the funds to buy the Plainfield debt. It’s difficult to pass the Colorado gaming board ownership standards and some investors have speculated if the true owner of Canfora’s equity stake is a member of one of the financial firms who did the original casino financing. PFAM had tried to make an equity investment in the casino during the build out phase but didn’t get pass the Colorado gaming board review.

The investor suit is currently in arbitration but Canfora hasn’t taken their claims lightly. He sued investor John Schaffer for defamation in Colorado state court after Schaffer spoke out during a public gaming board hearing last summer on Canfora’s questionable actions. The defamation suit was tossed out in December but Canfora still denies he has done anything to harm investors in his role as casino manager.

A wealthy Philly businessman recently hired Canfora to manage a new casino he won bidding rights on in the city of brotherly love. Canfora also up and quit the Colorado casino management job around the time the investor lawsuit was filed.

Bitcoin Insight: Here is why that Digital Currency’s Value Really Jumped Sky High

I broke news about a change in how the digital currency, bitcoin, would operate on an exchange for U.S. and Canada last week and my peers in the finance and tech press woke up to this trend. Bitcoins are a peer-to-peer monetary transaction system that is trying to challenge government controlled currencies — like you know the almighty Dollar.

Unless you watch RT’s Keiser Report or read what American Banker has said about how this currency could disrupt fee revenue for banks, you’ve likely never heard of them. But since I reported at Bitcoin Magazine that Coinlab, a VC backed silicon valley firm, was using a silicon valley US bank to make transactions faster and cheaper; the value for one bitcoin went and jumped about 40 percent in the last two days. My peers who were rushing to figure out how to write about it at CNN or even Barrons thought it was all about the Coinlab deal. But they didn’t get the simple mechanics of why the currency really jumped.

This chart shows at about $43 there was a large (1,500 BTCs) ask and then there were no sellers. There is a limited supply of bitcoins, as unlike Heli Ben you don’t just print more money to manipulate their value. So since there were no sellers the price kept jumping up. And then you see another big ask (1,000 BTCs) and still no sellers so the price kept climbing all the way to $49 today. It’s leveled out to about $45 at press time but this shows what can happen if people are willing to risk buying large blocks of bitcoins and there are no sellers on the other end. It takes the value to new levels and this time scared the rest of the market into not knowing if they should hold or sell. As more people understand how bitcoins work this shouldn’t’ happen as much.

With Coinlab’s new announcement that they think they can keep like $1 million worth of bitcoins safe from being hacked or stolen…well a few institutional investors are likely jumping in BIG now. And a whole new wave of buy big and hold people will come into the equation. This could mean we see some more steep volatility jumps so it will be interesting to watch what the currency holds at next week – assuming there is not more earth shattering deal news in the space which could happen with all the VC/Angle money sniffing around Bitcoin Companies right now.

Bitcoins are a transaction based currency. They need buyers and sellers in an a somewhat equal way to keep the value from huge volatility swings. We didn’t have that this week because perception, or let’s say smart players are waking up to the reality of the currency being a viable alternate to paper money, took over.

The fact that when you buy bitcoins you can remain anonymous adds a layer of difficultly in figuring out if one or two guys who keep making up different identities are contributing to all the new buy volume or if a diverse number of people are really pilling into buy bitcoins. The latter being the ultimate dream for companies, like BitPay, who is working fast and hard to get more street level retail companies to accept bitcions.

So when more sellers enter the market – hopefully in the next few days – we could see the value go down a few bucks.

Bitcoins aren’t a fad. I wouldn’t be spending my time to learn about them and place my byline on a subject I thought wasn’t worth paying attention to. The idea of a digital currency that cuts through government currency wars and takes away fee revenue from too big to fail banks that gouge the consumer is a very real trend. Whether it’s bitcoins or ripple or another digital currency that has staying power only time will tell. But right now we are seeing venture capital money jump in to bitcoin related companies – you know like the ones that got in early to facebook or twitter – and they’ve spent a year doing research to make these investments. And it’s not stupid money being invested as I wrote about for the January issue of Bitcoin Magazine.

Sure there’s a lot of risk associated with bitcions. Value is going up and down-well more straight up right now. You can’t pay for all your food and gas with them yet. There needs to be more main street acceptance. There are lots of unknowns. Even today we don’t know WHO/How Many drove the value up in bitcoins but at least this reporter is trying to show you HOW it got done.

UPDATE 3-7-13: For those who need to hear the news on TV Max Kesier was on a RT nightly news show last night giving a quick explainer on Bitcoins. It’s worth checking out. Also as I wrote last night the value did go down a few bucks and it hovering around $42-$43 this Thursday morning. Now this is still up $10 since the Coinlab news and media blitz started last week.

Hedgie James Higgins Threaten by Wife’s Ex-Lover

A New Canaan hedge fund manager was subject of a news event last week after reporting he and his wife were being harassed on the phone by a man who allegedly wanted to break them up and then force the hedgie to eat pizza. The initial news report said the man was giving the hedgie a hard time because he worked at Bear Stearns and the man was obsessed with his wife. Police reports show that former Bear executive was James Higgins (goes by Jim) who founded Stamford-based Sorin Capital Management.

The caller, Donota Anthony Minicozzi, was arrested last week for threatening, harassment, and larceny via extortion. Higgins told the local cops he was getting three to five calls a day from his alleged harasser who said things like:

“Bear Stearns crook. Notre Dame sucks. See you at South Beach” The caller said his name was Steve and started the contact in December. He’d ask James “Did you have a good year, you crook? After bankrupting Bear Stearns. 7 bedrooms in New Canaan CT. Sue was good with one bedroom in NY in her dancing years.”

It turned out that James wife, Susan, did know Donato.[They are the mid-40’s couple on the left in the photo] Police reports say she told him she dated him 20 years ago but broke up with him because he stole money from her. Donato actually has a criminal history in New Jersey for a larceny conviction in 1988 and in 2001 he was charged with forged writing. His warrant report says he now sales flooring.

Donato used disposable cells phones so the cops had to get the courts permission to ‘ping’ his number the next time he called. They were able to even track a call to a Planet Fitness in Brick,New Jersey. Apparently Donato liked to work out and do his harassing at the same time because when the cops called the gym someone who worked there said yea he’s in the gym at the same time the call was made.

James Higgins wife Susan Photo:Jim Gerweck

James Higgins wife Susan Photo:Jim Gerweck

Susan Higgins was getting her own phone calls – hang ups that is and then pizza started to be delivered to the house because Donota thought ‘it’s just a symbol that we can get to you (James) any way we want.’

How the cops charged him with larceny get’s a little fishy since he didn’t steal anything and the police report doesn’t show an extortion plan to change money ever happened. Recorded phone calls do show the ex-lover telling James “You can keep your fucking money and we are going to fucking torture your life. We are going to start sending shit to your house. The pizza is just a fucking start. Just wait till the fucking girls start coming to your house. Your life is going to be one miserable thing.”

I guess girls and pizza are not a welcome thing in the Higgins house.

When the Stamford cops finally found Donota and left a message for him to call the Special Victims unit back he lashed out one more time to James. On January 23rd at 8:51am he left an angry message about sex saying “Special victims-that should be the fucking people you screw every day. The people you take 3 percent every day. What you should be worried about is to screwing your fucking wife the one that used to screw everybody. I have film. You know your wife used to do that, and I had her plenty of times too. You should use some of the bedrooms you have in your house to screw her.”

Well now. A reporter for the Stamford Patch apparently was at Donato arraignment because he reported the New Jersey man turned himself in and told the cops he was sorry, had just been divorced, and well….was lonely. He even brought the cops one of the Motorola phones he used to make the calls.

Now apparently Donato wasn’t very good at Google research because a simple name search for James shows he left Bear Stearns in 2004 – as co-head of their commercial mortgages group – which would have been well before the bank started blowing itself up on crap resi mortgage bonds. Higgins also didn’t have a great year for his flagship hedge fund during the financial crisis. In 07 investor records show he was running $1.5 billion and had returns of over 20% but in 08 the fund suffered a 36% loss and he liquidated it in 09. Sorin Capital has other funds and started a second flagship fund which hopefully is doing ok. He did fork over near $8 million in 2008 for his newly built 7 bedroom , 7 bathroom , 9,600 square foot mansion on New Canaan’s tony Ponus Ridge Rd. Maybe Donato was a little jealous over Susan and James’s fancy house?

I called James at his Stamford office for comment today. At first the man who answered the phone said he wasn’t there. When I told him I was a reporter who was about to report James role in this little saga James quickly came to phone. He wasn’t thrilled the story would be reported and made a few off the record comments trying to convince me not to report it. He wouldn’t answer if he still feels threaten by Donato now that he’s arrested and has a protective order against him and just gave an official no comment. There is nothing in the police report saying Susan and Donato had recent contact/relations before the alleged harassment started so besides memories from 20 years ago we don’t really know what motivated Donato threatening calls and food deliveries to the Higgins.

Donato is schedule to be back in court this month. It’s not clear if the Higgins still allow pizza deliveries to their mansion.

UPDATE 4-18-16: Susan Higgins is back in the news again. Allegedly she was out partying to much on Wednesday April 14th and decided to drive home and crashed her car on West Ave in New Canaan. By the time the cops got there the car was in flames and Susan refused to do a breath test. She has now been arrested for driving under the influence. So far there are no reports of others hurt in the accident.

How the NY AG built his RMBS case against JP Morgan for Bear Stearns Sins

This story has been updated

One documentary film maker, one investigative journalist, and one law firm willing to take a risk led to the lawsuit the New York Attorney General just filed against JP Morgan for a system wide effort to defraud mortgage investors by Bear Stearns.

My readers and viewers of RT’s The Keiser Report know they first learned about Bear Stearns fraud back in 2010 after I was the first journalist to report for The Atlantic Bear Stearns whistleblowers were on the record saying they were directed to make up loan level detail for the mortgage bond raters. From there I broke news again at The Atlantic in January 2011 detailing how Bear’s own internal documents showed the RMBS traders, under Tom Marano, were literally stealing billions from the clients they’d sold the mortgage bonds to via a double dipping scheme.

The documents to outline the double dipping by Bear traders was discovered by PBWT attorney Eric Haas – who also has an accounting background. It was this evidence that enabled him to add a fraud claim, that survived a motion to dismiss, to Ambac’s suit and year and a half later JP Morgan had to admit in their regulatory filings for shareholders that they were now looking at $120 billion in possible RMBS fraud and putback suits. These additional suits filed by the FHFA for the GSE’s and tons of other mortgage investors would have never happen if PBWT hadn’t been first to do the gritty research and detail to build their claims against $JPM/$BS/$EMC.

While this is likely the most impactful reporting of my career it couldn’t have happen with out one documentary film maker, Nick Verbitsky of BlueChip Films. He was first to find former EMC/Bear analyst to go on camera and detail the methods of deceit and fraud by the billions. It was Verbitsky’s unedited interviews that led to my first The Atlantic story. And it was that story to helped open up research for attorneys at Paterson Belknap for their client Amabc.

I remember getting a call notifying me the NY AG’s office had read my reporting and wanted to reach filmmaker Nick Verbitsky to get these unedited whistleblower tapes last year. And then we watched AG Schneiderman slowly start to interview the Bear Stearns whistleblowers which I reported multiple times on RT’s The Keiser Report. A program that was bold enough to trust my reporter instincts, go up against one of the world’s most powerful banks, JP Morgan, and know it was a good idea to warn viewers the bank is going to get their asses sued and it could affect the financial health of the company.

The NY AG also got a push from New York State Assemblyman Morelle who asked him to investigated Bear/JP Morgan for insurance fraud using New York State insurance laws. I first reported the NY AG was beginning his investigation in April 2011 for DealFlow Media’s The distressed Debt Report. Today we see copy cat New York Times reporter Gretchen Morgenson source that people familiar with the AG’s investigation told her he began in the Spring of 2011. In reality Gretchen read my original reporting and the The Atlantic’s mention of it back in April 2011 and I find it absurd that she can’t properly credit where she learned about it first. I have to wonder if Assemblyman Morelle, who chairs the insurance committee, is satisfied with the NY AG only bringing civil fraud charges against JP Morgan – if he’s not will he push the DOJ’s Southern District of New York office to carry the ball over the line and actually charge individual bank traders with criminal wrong doing? You can see a slew of likely illegal actions the Bear traders did that the NY AG left out of his suit in a story I wrote for DealFlow Media last August.

Today’s one of those days when it feels good to be an independent financial journalist and I want to thank my editors at DealFlow Media and The Atlantic along with Max Keiser and his producer Stacy Hebert at RT for publishing all my original reporting on this crime. To my fellow journalist just catching up on the story don’t forget to credit those who were the catalyst for action.

What’s next – I think PBWT and other Big Law firms, who have copied their suit and sued $JPM, are going start taking some serious settlement offers from $JPM and I expect it to be in the billions. I mean look at all additional whistleblowers that came forward from other firms Bear Stearns hired to help them sell mortgage bonds.

As far as JP Morgan shareholders go, if the bank’s payout to settle rmbs fraud and putback claims is in the double-digit billions then I’d expect lawyers to start filing class actions suits against JP Morgan for not disclosing enough rmbs putback risk. This is an issue I wrote about in May. There is also the fact that the SEC went to $JPM back in 2010 and told them they are not holding enough capital for putbacks – I reported this on Max Keiser’s show in November 2010. So why did the SEC allow this big bad bank to under-reserve for the last two years and report higher earnings? That’s a question we’d all like answered but are not likely to get.

Editors Note: Verbitsky’s doc film about Bear Stearns, Confidence Game, is showing at the Bruce Museum on Thursday night in Greenwich,CT. I am a panel guest, along with Roddy Boyd and William Cohan who will be speaking with Veribitsky after the movie. Come see it and hear first hand how we uncovered this fraud and how regulators came to us help build their case.