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The Anatomy of a Con

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Yesterday we mentioned that Hakan Yalincak had pled guilty to charges that he had tricked investors in his phony hedge fund out of millions of dollars. More than a few of you wrote in to ask, in the somewhat edited words of one reader: "How the $@#! did some twenty-one-year-old f***wit with no finance experience whosoever get sophisticated, wealthy d*$%heads to fork over millions?"
The best version of the story was told by Steve Fishman last year in New York. After the jump you can read the excerpt on how the fund got going.

And then, in 2003, Hakan met Matthew J. Thomas, a banker who could have been sent by a casting agent. Thomas, 38 at the time, six-foot-something, had light-brown hair, Waspy good looks, and credentials—there’d been stops at Banco Santander de Negocios, Morgan Stanley, Credit Suisse First Boston. Plus (this would prove important), Thomas came with a flaw: credit-card problems.
The partnership seems to have gotten started over a takeout vindaloo dinner at Hakan’s parents’ house. Thomas worked for the venture-capital firm Spencer Trask and was hoping to pitch investment ideas. Quickly, though, the dinner morphed. “How to finance our own [venture],” as Thomas puts it in a thank-you note. Thomas’s idea: credit cards.
Thomas may look like a reassuring Protestant banker. But within months he was getting disturbing messages from U.S. Postal inspectors, federal agents who investigate credit-card fraud. Thomas turned to Hakan, wondering about a loan. By the end of 2004, he had signed two promissory notes to the Yalincaks—they totaled $925,000. What they covered, and how much Thomas got, is in dispute. But, this much is clear: Hakan now had a useful ally, a boon to the business.
Thomas could socialize with clients in a way Hakan couldn’t, even if some of his frat-boy behavior embarrassed the whiz kid. After a dinner at Restaurant Jean-Louis in Greenwich, Hakan says, he sent Thomas back to Manhattan in a limo with a prospect. “He farted,” Hakan bursts out, in giddy horror. “What a way to impress a client!”
And Thomas had valuable contacts. In particular, he knew Joseph Healey, who co-manages Healthco, a hedge fund that partnered with SAC Capital Advisors, the fund for which Hakan sometimes dreamed of working. Thomas seemed to know Healey pretty well. For one thing, Healey had dated Thomas’s sister. A few weeks after signing a promissory note, Thomas took Hakan to see Healey.
The pitch is a challenging, many-levered thing, especially for a teenager. Some investors like a dog-and-pony show. Daedalus shared office space with Jackie’s mortgage business. One day, Japanese investors poked their heads in. It must have seemed impressive: young people working away at computers. Actually, it was Amanda, the Greenwich girl with the Tiffany earrings, and a bunch of friends instant-messaging one another.
Most investors focus on the paperwork and the people, both of which Hakan and Thomas seemed to have in order. Daedalus had apparently lined up the right banks—Morgan Stanley, UBS—and a respected attorney, who filed the right forms. Hakan pulled out his trading lingo. And Thomas had that résumé. “Thomas is the one who had the ear of our clients, not Hakan,” says a lawyer for investors. Plus, Hakan and Thomas distributed reports that the fund was performing spectacularly. Up 48 percent, said an October 2004 statement.
It didn’t hurt that Hakan’s pledge to NYU was just then getting publicity, suggesting that the nerdy kid was from a family to be reckoned with. Recently, NYU had used a $1.25 million down payment to convert the old Bottom Line music hall into the Yalincak Family Foundation Lecture Hall.

Mommy's Little Con Man [New York Magazine]