Even Hedge Fund Managers Get Suckered by Nigerian Prince Scams

James Altucher is a hedge fund manager, entrepreneur, and self-help business book guru. He was a columnist for Financial Times, sold a startup called StockPickr for $10 million, and is currently the managing director of Formula Capital, an asset management firm. And he almost got suckered by one of the oldest investment scams in the book.

In a hilariously hyperbolic Facebook post Altucher published today—it begins with the all caps disclaimer that his wife "CLAUDIA IS WORRIED I WILL BE KILLED FOR POSTING THIS" and immediately pivots to the self-aggrandizing "I stopped a $10 million robbery last week"—this titan of finance reveals that he is in fact less financially savvy than nearly anyone you've ever met.

Because it was actually Altucher who enabled the almost-robbery to occur, and only evaded getting his investor friends scammed by a twist of blind luck. It's probably worth reading the whole story in Altucher's own breathless words, but the gist of it is this:

Altucher heard from a "friend of a friend of a friend" that a nameless Middle Eastern business magnate was looking for a $10 million loan to buy up some real estate. But he needed the cash fast, so he was willing offer up $25 million shares of "a private internet company" as collateral. Altucher thought this sounded legit, so he called up some investor buddies until he found "Bill," who did too.

Here's where it gets preposterous. "Bill" then drew up the most onerous loan terms possible, and offered them to the mystery magnate:

Bill said, “We’ll lend $10 million IF we get the full $25 million on any default.” Here were the other terms Bill said.  - 15% interest, paid quarterly
- the full loan is due back in two years
- $600,000 fee paid to Bill up front.

- Bill wanted 25% of all the upside on the full $25 million in shares for the next ten years.

Even Altucher admits, "I had never seen a term in a loan like that." But the Mystery Magnate immediately agreed to the ridiculous terms, and no red flags went up. The MM sent over alleged pictures of the shares, and $15,000 to cover "Bill"'s legal fees, and no flags went up. "Bill" wanted permission from the internet company to become the shareholder should the MM default on the loan, and was immediately sent documents signed by the company's head of investor relations on what appeared to be the company's letterhead. A contact number was included.

Never did he attempt to meet any of these parties in person, or, evidently to call them by phone. No red flags went up, despite the whole thing's blatant resemblance to infamous Nigerian Prince and lottery prize scams.

Coincidentally, however, Altucher noticed that he knew the internet company's head of investor relations, as he'd happened to have worked with him before. But he didn't say anything.

Then, "Bill" was getting ready to wire the $10 million dollars to a mysterious business magnate in the Middle East. But he had finally began to get the slightest sense that something seemed "funny." The internet company's documents were too simple and straightforward—they didn't even seek to protect their own assets in the deal.

"Why didn't they throw in a line indemnifying the company?” "Bill" wondered. So, since Altucher happened to know the guy, they decided, finally, right on the cusp of wiring some guy they'd never met $10 million, to try the phone number.

"Bill" called it up, and, when he told the voice on the other line that he had "your friend James Altucher on the line," the scammer hung up.

But we're not done here. Altucher just thought they'd lost the call. "Bill" had to explain to him that the guy on the other line was a huckster, and had hung up in a panic, thinking he was caught red-handed. Little did he know that our titans of finance are evidently so oblivious that he'd inadvertently fooled one into thinking he was in fact an old acquaintance.

Altucher ends the post with some meandering musings on the nature of good and evil before remembering he'd cast himself as the hero in this tale:

I want life to be simple and good. I don’t want my head to hurt. I don't want to deal with bad people … Sometimes people ask me what I do for a living.  I solve crimes.

This is the mindset of a man who routinely hurls around millions of dollars, who uses heaps of other people's cash to make big bets, to pull the drawstrings of the global economy. I wouldn't trust him with $20.

More on Internet scams:

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