The Phantom King: Investing with SWIFT MT-760 and how it works
Michael and William Wilson’s indictment suggests Michael Wilson’s New Frontier Trust and Zodiak Capital firms offered a variety of nontraditional investments to clients.
Most involved a SWIFT MT-760, an international bank instrument that puts a hold on a certain amount in a bank account to be accessed by another person. SWIFT instruments are recognized by banks around the world, but are considered very risky. An MT-760 provides unfettered access to bank funds, and lines of credit can even be opened on MT-760 notes, leaving the account holder on the hook.
New Frontier, according to prosecutors and one would-be investor, would take in client funds, then market SWIFT MT-760 notes from those funds to earn substantial returns—sometimes “several times” the original value, and in one case, “ten times.” The exact buyers are unclear, but SWIFT pitches usually involve international private placement deals, according to fraud consultant Louis Straney.
Private placements are a legitimate way for businesses in the U.S. and abroad to raise capital, says Gerri Walsh, vice president of investor education at the Financial Industry Regulatory Authority. They are sometimes called “medium-term notes,” existing between short-term “commercial paper” and long-term bonds. The offering itself is not registered or recognized by the U.S. Securities and Exchange Commission, but the seller does need to file with the SEC, Walsh says.
Walsh suggests that any individual looking to invest with any advisor, under any company name, search their broker and view their history and disciplinary record on FINRA’s broker check service at finra.org.
Twenty-on-year-old Michael Wilson bought a half-dozen properties around Buffalo and may have taken up to $8.2 million from people he had never met. Then he disappeared. Read more about it in Kevin Purdy's feature story, "The Phantom King of Buffalo."