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The Bidens and the Bernie Madoff of Australia

I’m an avid reader of financial blogs.  One of the blogs I read is Bronte Capital- www.brontecapital.blogspot.com.  This blog covers an eclectic range of financial issues, and is written by John Hempton, an Australian.  Hempton has always impressed me as fair and objective.

Hempton’s most recent entry concerns the Astarra Strategic Fund, which is part of a group of related hedge funds which have been seized and closed as a result of Hempton’s September letter to the Australian equivalent of the SEC.  In total, the funds claimed to have managed about $1 billion in assets.  Keep in mind that Australia’s economy is 1/20th the size of the US economy, so in Australia the Astarra scandal is of comparable size to the Madoff scandal in the US.  Right now the regulators are busy looking for assets as they liquidate the Astarra holdings.  We’ll soon know how much of the $1 billion is left. 

The Astarra scandal is relevant in the US because Hempton points out that there are ties between Astarra and Paradigm Global, the asset management firm owned by Hunter and James Biden, the son and brother of Vice President Joe Biden, respectively.  Here are some links:

1.  Several managers of Astarra were at various times also staff members of Paradigm.  This includes the former CEO of Paradigm, Charles Provini.

2.  Paradigm and Astarra apparently co-marketed together.  Here’s a quote from Hempton:

The boys from Absolute Alpha went to New York and co-marketed with people from Paradigm.  Indeed I know someone who thought that Absolute Alpha were OK because staff at Paradigm had vouched for them.  Whether Paradigm knew that Shawn and Eugene in Australia were using “Paradigm inspired” marketing material however is unknown. 

Hempton concludes by pointing out that this is, by his count, the FOURTH fund which the Bidens have been linked to.  Here’s an article discussing one of the other links:

http://www.cjr.org/the_audit/bronte_capital_with_a_major_sc.php

Hempton notes that it took him all of forty minutes of research to realize that Astarra had problems.  It turns out that he was right.  He wonders why the Bidens exercised such poor due diligence, since their raison d’etre as managers of a fund of funds is to properly qualify the funds they put money into.  Here’s another Hempton quote:

Paradigm – the Biden’s firm – had unwittingly got involved in another funds management firm which has been closed by regulators or been exposed as Ponzis.  That is four I know of now – and I have yet another one that I suspect of being unsound. 

One final note- I first read this article yesterday evening.  I tried to pull it up again this morning to write this diary entry.  Hempton writes his blog on the Google Blogger service.  When I tried to pull up the blog, I got the message “Blog not found”.  Google has taken down the blog.  Fortunately I was able to grab the cached version, and can post the entire blog if anyone would like.

George

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