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Sentinel Only Playing Dumb, Actually Run By Racketeering, Fed Manipulating Geniuses

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(Allegedly.) When we asked yesterday what would be the next proverbial egg on Sentinel’s face, we were anticipating something along the lines of “filed for Chapter 11 bankruptcy with the wrong regulatory body” or “put tinfoil in the microwave,” and not “civil fraud charges of lying to investors and misappropriating their assets” levied by the SEC. But what can you do? Go with it, that’s what.
So: in a complaint filed with the U.S. District Court in Chicago yesterday, the SEC claimed that Sentinel defrauded its clients by improperly “commingling, misappropriating, and leveraging their securities without their knowledge,” in violation of the Investment Advisers Act (specifically, the Blood Brothers clause). Supposedly, Sentinel relocated $460 million in securities from clients’ accounts into its own using one of those cranes from the arcade games that are impossible to win but you end up spending an obscene amount of quarters on anyway in a vain attempt to prove you can be the first person to beat the system, in order to obtain a $321 million line of credit—for its own selfish gains. (Not to play sides here, and to side with a bunch of criminals at that, but if you’re going to commit a felony, here’s hoping there’s a personal benefit on the horizon).
Shockingly, in its daily account statements to clients, Sentinel did not feel the need to touch on the “improper activities” that were going on at the firm ("Hey guys, we're stealing your money, what's new with you?"). And in the letter that was sent out August 13, informing customers that a $1.5 billion fund was being frozen and that they wouldn’t be getting their money back without selling assets at “deep discounts,” like, say as much as 30 percent to market prices, Sentinel opined that “fear has overtaken reason.” Apparently, at the time, no one at the firm “feared” “getting caught.” This would explain why Sentinel blamed everything on the “liquidity crisis” and not themselves.
Perhaps the best part of this whole deal is that Sentinel is now being blamed for (go with me on this) everything bad that happened last week, and the reason the Federal Reserve Board cracked.*
(To be fair, though, it really is common knowledge that you can blame anything on the markets, as they’re mostly a solipsistic construct. Try blaming something on the markets tonight. Seriously—it works.)
U.S. files fraud charges against Sentinel [Reuters]
Sentinel Sued by SEC, Accused of Defrauding Clients [Bloomberg]
NFA Drops Sentinel Ball.. SEC Picks Up Sentinel Ball [Naked Shorts]
*unconfirmed: Cramer has challenged Sentinel to a duel at the Garden to determine who can take the credit.



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