Thursday, 2 January 2014

The Hudson Investment Group circular investment fraud

ASIC has for years allowed revaluation fraud and circular investment scams, whereby a cartel of related companies uses crossholdings to inflate the reported assets based on which shares are issued to granny investors. The cartel manipulates the share prices of its members and performs internal circular sham transactions, loans and write-offs. By having cartel members trade at artificial prices with each other, false profits can be engineered and fraudulent balance sheets created. Nothing new under the sun; Ivar Kreuger used the same basic modus operandi in 1930.

One such circular investment scheme has been formed by Hudson Investment Group (HGL.AX), Hudson Resources (HRS.AX), Raffles Capital (RAF.AX), Sovereign Gold Company (SOC.AX), Precious Metals Resources (PMR.AX) and various associated unlisted entities such as Pacific Portfolio Investments. These parties have formed a criminal organization, the aim of which is to issue shares to granny investors based on fraudulent valuations. Crossholdings serve both to inflate NTA and to separate control from ownership, while internal sham transactions and revaluations create fake profits. The annual reports for the cartel members are all fraudulent, signed off on by auditor and cartel associate KS Black & Co.

The above figure shows crossholdings as disclosed in the cartel's latest fraudulent annual reports. True crossholdings are likely to be substantially higher, given hidden holdings through shell companies. These crossholdings are in and of themselves prima facie evidence of securities fraud, as directors using shareholders funds to build crossholdings with related parties are breaching their fiduciary duty, irrespective of whether such fraud is disclosed or not.


  1. Apparently they make cat litter, as well as have a car park. The directors are not doing as well as my favourite fraud, CTO, though.

    Looks like an illiquid stock, the spread between bid & ask is huge, & the depth of quotes is almost non existent. CTO looks positively 'money' compared to it.

  2. Ah yeah and the Blumont crew have recently taken up another 10% in CTO through investment entity Express-Link Management Ltd.

    To prove it's a small world after all, the Blumont cartel is associated with the Hudson crew, with Raffles showing up as top 20 shareholder of Liongold.

  3. So these Malay-Chinese fancy themselves as some kind of corporate raiders? Or is that giving them to much credit?

    I hope it's only Malay-Chinese grannies they are scamming. Malays are predominately Muslim, & relations are often tense. There is always the possibility that the rising ASX will 'float all boats', but I wouldn't bet on it.

    1. These criminals are "corporate raiders" only in the sense that Madoff was a "fund manager". This is a criminal organization, a cartel that purposefully and deliberately engages in securities fraud, issuing shares based on fraudulently misstated assets.

      Crossholdings are used to artifically inflate reported assets, based on which shares are issued. Anyone that bought shares from the cartel has been scammed, of whatever nationality.