The Ominous Update
The long awaited update came out a couple days ago. It is a book (something like 47 pages long). In the update, Mr. Lowrance gives religious commentary, rants about different individuals who have called him out/criticized him publicly, etc., with maybe 1/4 of the update as relevant/pertinent information (ie what happened, what is the plan for the future). I will attempt to recap the highlights and have left out the personal attacks and religious ramblings.
Mr. Lowrance claims that he is not the same as Mr. Madoff because his intent was different. He claims that because he did not intend to scam investors from the start, that his scam (my word- not his) is more noble somehow. Mr. Lowrance states, "after reviewing the records of FCSL, they (and you) would not find me to be guilty of fraud. But honestly, you would find me to be guilty of mismanaging the funds that were on deposit at FCSL. That is what I would be “guilty” of. But not of defrauding my clients." Then he goes on to say, "To the best of my knowledge, the mismanagement of funds is not necessarily a crime either." I wonder what the SEC or FBI think about his mismanagement of funds? For Mr. Lowrance's sake I hope he doesn't find out.
Mr. Lowrance goes on to criticize investors who have lost their life savings in his investment by saying “You need to face the fact that you made a bad decision by investing everything you had into one place. That was not my fault. You did the wrong thing with your investing portfolio. That was your mistake, so you need to face the consequences of your actions head-on, just as I have to face mine as well.” Mr. Lowrance then says that it is still his intention to pay those investors back, even though he says it would not be difficult for him to hide behind bankruptcy protection.
Mr. Lowrance blames the currency market for the failure of FCSL by saying, “I could not have known in advance, and neither could my chart readers have known in advance, that the Forex business was a con-job by the major banks of the world to lure innocent people into the “business” of “currency trading”.” Mr. Lowrance had been sending emails to clients (who requested them) of trades that FCSL had been placing to show investors that they were continuing to trade profitably, however Mr. Lowrance claims that the trading signals were produced by two expert Peruvian chart readers and were not actual trades. It is ironic then that he later says that forex trading is part of his proposed solution to pay investors back. He says that his two Peruvian traders are now ready to do live trades and that is his strategy to pay back his investors the tens of millions that he owes them.
Mr. Lowrance says that he believes he owes about $26 million for invested principle only and about $42 million if you include principle plus interest accrued since FCSL stopped paying investors. Mr. Lowrance admits he told at least one person in November 2008 that the $42 million was still in tact, but now claims that he lied to that individual and that there is no money left.
A blog was started late 2008 for investors to deal with the FCSL situation and to come together to discuss solutions. Mr. Lowrance claims that this blog hindered his efforts to raise new capital to pay back the most “needy” clients. Isn't using new investor funds to pay other investors the very definition of a ponzi? Maybe I misunderstood, but here is the quote from the update so you can decide for yourself, “I started a program that was paying much less than what we had been paying for the first 4 years to FCSL Premiere Clients. We brought in about 24 clients during the months of Sept. 2008 through December, 2008, those last 4 months of the year. I believe we had brought in about $480,000 during that time. The FCSL records will show this to the penny. However, by that time in early October, the “blog” had already started to do major damage to FCSL bringing in new clients. Without interference from the blog, we were set to bring in about $2.5 to $3 million by the end of 2008. We could have easily set aside a small portion of that to pay the most-needy clients right away, pay some pressing bills, and apply the majority of the rest of that money to trading.”
Mr. Lowrance admits that besides owing millions to investors, he still owes money to employees in Panama and vendors in the United States (he had a national newspaper called “USA Tomorrow”) for services already rendered and claims he will pay them back as soon as he can.
Mr. Lowrance gives a long history about his fund and says that he tried several systems and signals but none were successful. This leads one to wonder how investors have been paid for the last 4 years...
Mr. Lowrance claims that he has projects that he is currently working on and that he will pay the most desperate investors within 2-3 months. Then his time frame for paying everyone else will be 9-12 months. He goes on to threaten “I know that I am the asset here and that if anything happens to me, no one will ever get a dime.”
Mr. Lowrance never states outright what happened with investor's money, but there can be two conclusions drawn from this update. Either Mr. Lowrance has truly lost the funds by paying investors from new investor's principle (read ponzi), or his trades were real and profitable and that Mr. Lowrance doesn't want to part with his stolen millions. It is as Mr. Lowrance put in his update- only an audit of FCSL accounts and time will tell.