We wrote about the litigation initiated by the SEC against GlobalOnlineDirect a year ago in July 2007. As predicted, when the government gets involved issuing a cease and desist order for these types of online “investments”, any hopes of recovering lost money for the majority of the investors is only wishful thinking. The biggest losers are usually the small investors, and the biggest winners are the hired hands that the government has on the payroll to supposedly recover the missing money.

According to the original litigation, Global Online Direct Inc. took in $45Million from at least 9000 investors. On October 6, 2008, the latest declaration from the Grassmueck Group, the court appointed receivership, only $1.5M is available to return to the investors from what has been recovered.

Now for the bad news, only investors that had invested at least $2000 are authorized to submit a claim. This would leave out at least 50-90% of the investors because when this program was online, the minimum investment to participate started at $150 and later raised to $500. Most people will usually go in with the minimimun to “test the waters”. Unfortunately, the majority of them will receive zilch from the recovery efforts.

This begs the question, does government intervention and meddling really for the protection and benefit of the investors? To rub it in, the biggest winners in this whole fiasco are the receivership, attorneys, accountants and various consultants hired by the government to provide “relief” to the bilked investors. How much was their windfall? Read the first “Notice of First Applications for Professional Fees and Expenses“.

Receiver :                    $124,558.00 + $ 6,158.67 in expenses
Receiver Counsel :        414,982.00 + 25,285.93 in expenses
Local Counsel :               26,754.00 + 1,876.14 in expenses
Receiver Accountant :  158,632.95 + 2,501.82 in expenses
Total:                 $724,926.95 + $30,322.56 in expenses

It appears that the investors got duped twice, once by Global Online Direct Inc. and then again by our own trusted government that are elected to serve and protect its citizens. If the distribution were to be fair and all the investors got something back, $1.5M/9000 that would be a pittance of $167.00 vs the $755,000.00 being paid to our SEC and government representatives.

One blaring question remains. Where is the rest of the missing $42,744,750.49? Our government went through great expense and can not seem to find it. It is as if the paper trail ended and the money went into thin air.

Our theory is that this money is probably safely hidden offshore somewhere just waiting for Global Online’s defendants to withdraw and spend once they come out of prison in a few years. This is a testament that to protect your hard earned money and wealth you will have to put some offshore. The scammers do it, why shouldn’t you?

What are the lessons to be learned from this experience for the small investor? If you are going to participate in risky investment programs, ones that falls in the gray area of SEC jurisdiction; make sure it is located offshore. If the SEC litigates and halts the program, you can kiss your investment good-bye. (This is not to say all offshore investments are legit either, one will have to do the same amount if not more due diligence and work within your country’s tax laws.)

Secondly, educate yourself on how to safe guard your wealth from the leeches and predators by going offshore. Global Online Direct has demonstrated clearly they know how to do this, after all $42 Million is still missing.

This whole experience has us wondering what if the SEC had practiced a bit of “laissez faire”? Would the 9000 investors have gotten more than what they are getting now, which is practically nothing? What if the intentions of Global Online Direct was really honest and attempting to make good on what they were promising? We will really never know.

One thing we do know for sure is our U.S. government doesn’t really have the best interest of small investors in mind. Just look at the current financial crisis. Literally overnight, investors were wiped out in the stocks of IndyMac (INDC), Freddie Mac (FRE), Fannie Mae (FNM), Lehman Brothers (LEHMQ), Washington Mutual (WAMUQ) and the list goes on. All from the actions of our elected officials and employees of the taxpayer at the Federal Reserve, Treasury, SEC and FDIC. If they had done their job of watching over the real crooks on Wall Street, we wouldn’t be in this mess. So much for serving and protecting the people.

Thank you for reading this post. You can now Read Comments (2) or Leave A Trackback.