Paula Dockery for Governor

Rep. Alan Grayson Loses $38 Million In Ponzi Scheme

Posted on 10 July 2009 by admin

Alan Grayson

Alan Grayson

U.S. Rep. Alan Grayson, known on Capitol Hill for aggressively questioning key players in the nation’s financial crisis, has suffered a “financial disaster” of his own, he confirmed to WKMG Local 6.

Grayson, D-Orlando, fell victim to a billion-dollar Ponzi scheme operated by Derivium Capital, a South Carolina firm that a federal jury ruled in February defrauded Grayson of $34 million — an amount equal to more than half of Grayson’s 2008 net worth.

“It was very much like the Bernie Madoff situation,” said Grayson, who’s had Madoff’s Ponzi scheme in his crosshairs from his seat on the House Financial Services Committee.

In February, Grayson’s Washington office issued a press release criticizing Madoff’s “penthouse arrest,” calling for the swindler to be jailed while awaiting sentencing.

And in video played thousands of times on YouTube, Grayson on Feb. 4 facetiously asked a financial expert who tried in vain to warn regulators about Madoff’s scheme: “You referred to this several times as a Ponzi scheme. Is that some newfangled thing?”

Of course, Grayson knew better: at the exact time he spoke on Capitol Hill, his lawyers were in a South Carolina courtroom arguing he was a victim of just such a scheme.

“What happened to the victims in Madoff is the same thing that happened to me,” Grayson told Local 6 in an interview Monday. “I lost millions of dollars.”

Scam’s most frequent customer

Between 2000 and 2005, Grayson was the most frequent participant in Derivium’s “90-percent stock-loan” program, transferring about $29 million in stocks to Derivium and promptly receiving 90 percent of it – about $26 million – back in cash as “stock loans,” according to his court filings. In that sense, he lost only about $3 million out of pocket.

But Derivium had promised to pay Grayson profits on his stocks, if they appreciated enough over the three-year loan period to cover the amount of his “stock loans” plus interest. And Grayson picked some lucrative stocks. His $34 million in damages is based on the profits he should have received on stocks that rose in value – had Derivium not run out of cash and filed for bankruptcy.

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2 Comments For This Post

  1. FloridaWriterSM Says:

    The Congressman was Blessed to be able to recover from this terrible situation

  2. ben Says:

    Blessed. Fools like the people who read these blogs and allow their opinions to be developed by radio talk show hosts or obviously bias news programs on either side of the spectrum are why our country is in the shape it is. HE WAS NOT AN INNOCENT VICTIM, HE WAS COMMITTING TAX FRAUD AND BY USING THIS FUND THAT OF COURSE WAS A SCAM. GOOGLE IT. HES A CROOK LIKE ALL OF THEM.

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