DLP Positive Note Fund

[PHANTASOS]

I'll ask the DLP folks for an explanation.

To be fair, what you see is an allegation and notice of claim, not a judgment, but it sure looks bad. I'll be curious to hear their take as well.

The article says that "Bo Parfet, 42, is the son of billionaire and philanthropist William "Bill" Parfet. They are heirs to the Upjohn family."

While this is all news to us, especially those of us who have invested with DLP, this is definitely not news to DLP. They made a decision to keep him "on board." This begs the question, how much money does the Parfet family, or other Upjohn family heirs, have invested with DLP to buy this kind of influence? When you ask for an explanation, any meaningful answer to that inquiry would involve knowing the extent of family influence that kept Mr. Parfet employed with DLP despite allegations of selling unregistered securities and a history of investing other people's money in a Ponzi scheme.

Please ask the tough questions when seeking an explanation.

[The White Coat Investor]

Surprisingly, I heard back from them today (on a Sunday) with an explanation. Just waiting to make sure I'm okay to share the email with the forum.

In the meantime, here's a link to an article I found about the apparently successful argument for the defense:

https://wwmt.com/news/local/parfet-a...nancial-scheme

[afan]

Not sure the article characterizes the defense as successful.

It confirms that, contrary to what they told their investors, they put almost all the money in the Ponzi fund. If you accept that they did not know it was a Ponzi, what about the diversification claims?

At best, they operated a black box fund that invested in things that were black boxes to them. And told investors they were diversifying and that the management knew what was going on in the underlying investments.

This sounds much like Fairfield Greenwich, which gave investors an elaborate pitch about their due diligence, the extensive knowledge it had of the, by implication, many firms in which it invested, down to claiming to have seen detailed internal information multiple times per year. In reality, they just put all the money with Madoff. And charged a hefty fee for their non-existent diligence.

What about selling unregistered securities, no matter how they were invested?

I don't know anything about DLP. I have no idea what Parfet does there. At best, one would question his judgement and whether you want jom managing your momey.

Jumar again reminds us to be wary of black box investments.

[CordMcNally]

Regardless, do you really want your company associated with people like this?

Edit: It wasn't clear but I was talking about DLP.

[The White Coat Investor]

Not sure the article characterizes the defense as successful.

I didn't say the article did.

[The White Coat Investor]

Regardless, do you really want your company associated with people like this?

Why do you think I'm spending my Sunday morning between patients responding here and sending emails back and forth to them? This is news to me.

[bovie]

Why do you think I'm spending my Sunday morning between patients responding here and sending emails back and forth to them? This is news to me.

Appreciate you asking what I presume to be the tough questions. Will be interested to hear DLP response.

As someone who was considering an investment with them sometime this year (but without having yet begun any due diligence), I am thankful to Molar Mechanic and the rest of the forum for doing that job for me--and making any future due diligence irrelevant. Sharp tacks, as always.

Even the insinuation of impropriety is enough to count me out--but this is definitely some smoke, and where there's smoke...

No called strikes, right?

I'd imagine perhaps a similar mindset applies to WCI advertisers and partners, from a brand trust and quality perspective...

[CordMcNally]

Why do you think I'm spending my Sunday morning between patients responding here and sending emails back and forth to them? This is news to me.

I didn't mean your company. This has nothing to do with WCI, in my opinion, but I see how my post was easily misconstrued. I meant DLP. I never understand why companies in the investment world associate themselves with known fraudsters.

[The White Coat Investor]

I didn't mean your company. This has nothing to do with WCI, in my opinion, but I see how my post was easily misconstrued. I meant DLP. I never understand why companies in the investment world associate themselves with known fraudsters.

Of course it does. People always view all of our advertisers as endorsements, whether or not that is the case. If anyone I ever mention or interview ends up doing something wrong, it makes me look bad for associating with them.

It's also inappropriate to call someone a "known fraudster" prior to them actually being convicted of fraud. Fraud is a crime. 3 people were convicted of fraud in this case. They are all in jail. Mr. Parfet is not one of them. He clearly lost his company and a whole lot of his and his family's money. I don't have all the details, but I'm not sure someone who ever makes a mistake should be completely banned from working in his professional field. Imagine if that standard applied to medicine? There would be no doctors. So while there are no called strikes, I can't fault a company from hiring someone talented just because that person made a mistake.

Selling unregistered securities is only a crime if it is done to non-accredited investors. Essentially all private real estate is sold to accredited investors and thus exempt from that particular rule. More info here: https://jflawfirm.com/selling-securi...-with-the-sec/

[CordMcNally]

Of course it does. People always view all of our advertisers as endorsements, whether or not that is the case. If anyone I ever mention or interview ends up doing something wrong, it makes me look bad for associating with them.

It's also inappropriate to call someone a "known fraudster" prior to them actually being convicted of fraud. Fraud is a crime. 3 people were convicted of fraud in this case. They are all in jail. Mr. Parfet is not one of them. He clearly lost his company and a whole lot of his and his family's money. I don't have all the details, but I'm not sure someone who ever makes a mistake should be completely banned from working in his professional field. Imagine if that standard applied to medicine? There would be no doctors. So while there are no called strikes, I can't fault a company from hiring someone talented just because that person made a mistake.

Selling unregistered securities is only a crime if it is done to non-accredited investors. Essentially all private real estate is sold to accredited investors and thus exempt from that particular rule. More info here: https://jflawfirm.com/selling-securi...-with-the-sec/

You’re right that I should let things settle first but there’s quite a gap between making a mistake and knowingly doing something illegal. If a doctor knowingly did something illegal or knowingly did something to harm a patient then, yes, they probably should be out of medicine. Same with those in the financial industry.

[Tim]

I'll ask the DLP folks for an explanation.

To be fair, what you see is an allegation and notice of claim, not a judgment, but it sure looks bad. I'll be curious to hear their take as well.

More light than darkness. However, I am sure they have a spin if the same person is involved. Not sure if they have an interest responding publicly. Dangerous ground either way.

[The White Coat Investor]

More light than darkness. However, I am sure they have a spin if the same person is involved. Not sure if they have an interest responding publicly. Dangerous ground either way.

Yes, it's the same person.

I don't know if they will or should respond publicly either, but I can assure you they know a whole lot more about Bo and this situation than you or I do.

[afan]

I don't think any of this reflects on WCI at all. He sells ad space, looked into DLP and was happy to do business. Fine.

DLP, I don't know. It may also be a 100% legit operation. To feel comfortable about that they would need to explain how either

1. Jumar was a completely legit operation,

OR

2. The person who was running it had no idea what he was doing.

For Jumar to have been completely legitimate, then the accusations of misleading investors about diversification and due diligence have to be wrong. This could be the case. It would not be the first time some investors ignored what they were told and complained about a firm doing exactly what they promised.

It would also have to be the case that the accusation of illegally selling unregistered securities was wrong. Maybe it was legal to sell unregistered securities. Maybe the securities were properly registered. Maybe Jumar never sold them.

That only leaves the company blowing up because it put most of the money in a Ponzi scheme. This would not require dishonesty on the part of management, just incompetence.

The very best interpretation seems to be that Parfet had no idea what he was doing. He thought he had found a great investment, was catastrophically wrong about that and Jumar blew up as a result. Either he did not know about the claims and violations or they never occurred.

Still hard to see what value he would bring to another investment firm, but who knows.

These are the chances you take when you invest in black boxes. You put your money into an opaque, illiquid investment. The managers of this investment put the money into another illiquid fund that is opaque to them. You have no idea what is going on, except that you are sure you cannot get your money back when you want it.

I cannot see the appeal but there are customers so there must be demand.

[AR]

Surprisingly, I heard back from them today (on a Sunday) with an explanation. Just waiting to make sure I'm okay to share the email with the forum.

In the meantime, here's a link to an article I found about the apparently successful argument for the defense:

https://wwmt.com/news/local/parfet-a...nancial-scheme

So, he was merely incompetent. Well, I guess that's (slightly) better. I suppose he could have become more competent since then.

[afan]

Setting aside questions about honesty or competence of DLP or Jumar, why would anyone want this sort of investment fund at all?
Jumar was a hedge fund. It offered investors access to private deals that they could not get through conventional mutual funds or etfs.

Simple question- Who wants that?
To find these desirable, one MUST conclude that markets are not only inefficient but massively and persistently inefficient.
These sorts of blow ups are common in the hedge fund world. As we have found here, a $364M Ponzi collapse barely makes the news.
Last I saw, the hedge fund industry had assets of about $3.8 Trillion in early 2021. Vanguard alone has more than $8 Trillion.
Common Ponzi schemes and collapses on $3trillion vs NO such events on $8 trillion. And that is just one fund company. Add in the next top 9 fund companies. How much investor money has been lost like this in the 10 of them combined?
Which is the sounder investment?

DLP Private Note pays a "fixed" 5% on investments up to $250,000 with a one year term. Vanguard high yield corporate bond fund, which many consider too risky, currently yields about 3.3%.

Either DLP Private Note is far riskier than a junk bond fund (the most likely explanation) or for some inexplicable reason, borrowers are paying much higher interest rates than they need to. Companies that could get bank loans at 2% are paying DLP 6% or more. Why would they do that? Companies that could issue junk bonds at 3% are paying DLP double. Why would they do that?

With no evidence that hedge funds or private equity as industries outperform the market on a risk adjusted basis and the risks of private investment funds, why do people invest in these vehicles? Even in the perfectly honest funds-assuming one can know which those are and that DLP is one of them.
Why?
Triumph of hope?
Wishful thinking?