When LM Investment Management collapsed last year, thousands of families lost their life savings. Many of the victims are now suffering from severe financial hardship and even depression. At least one victim has committed suicide.
Last month, the South China Morning Post published an article chronicling the events leading up to and following the disaster. It was entitled, “When an investment fund goes bad“.
The article quoted an investment adviser named Martyn Terpilowski, who had grown suspicious of LM as early as 2009. This is the period when LM began paying higher upfront commissions and extending lock-in periods for investors.
A few of Martyn’s clients had invested in LM sometime around 2005 to 2006. When Martyn tried to help a client cash out in 2009, the client was placed in a “queue” that mysteriously never got shorter.
Both Martyn and his client were extremely upset. For the next three years, Martyn tried desperately but unsuccessfully to pressure LM to release his clients’ money. He sent hundreds of emails not just to LM, but also to life insurance companies and dozens of advisers, bluntly pointing out that it was unethical, unprofessional, and foolish for them to continue promoting LM’s funds when they knew very well that existing investors were being held prisoner. Martyn voiced legitimate concerns that LM was suffering from undisclosed problems, and he correctly predicted that investors would eventually be greeted by an unhappy ending.
Martyn thinks that the people who are most responsible for the LM debacle are now blaming everyone but themselves. Their behavior disgusts him. He is considering allowing me to publish hundreds of his emails on this blog, so that LM victims may have an opportunity to learn more about what really happened.
Martyn sent an open letter to Peter Drake on Saturday, but Drake has not responded yet. Here is a copy of that letter:
Open Letter to Peter Drake (Aug. 9, 2014)
Long time no talk. I have been watching your recent blog and your recent posting of a letter you wrote in response to the SCMP article. I can see that you made no reference to me in your response, for several reasons I would imagine.
Firstly I was very aware of LM throughout their existence and at one point actually believed in LM products. Secondly unlike the adviser you highlighted, I never sold any LM after it was abundantly clear it was going to end this way.
As you are aware I have hundreds of emails to back up my allegations against you, the life companies and other advisers going back to 2009. The fact you have all turned on each now, is sad, but predictable.
It has always been industry practice to stop taking money into funds when redemptions are delayed. Any adviser knows that, as do you and as do the life companies, but whilst keeping hold of my clients money you managed to get a 400% increase in AUM. How do you think you managed this? By feeding the greed of these advisers. 9% indemnified commission is not and never has been industry standard. Your aim was always to keep the clients money tied up to ‘kick the can down the road’ as long as possible. The fund was no where near as popular with advisers when it paid 3% and you were not allowed to put in bonds (Adviser paid twice when placed in bonds). Suddenly it became the flavour of the month with everyone and the life offices turned a blind eye. I have hundreds of emails to you, Martin Venier, other LM employees, the Life Companies, the Brokers who were still pushing this, telling everyone this was going one way. It was that predictable – I hoped I was wrong, but knew I would not be. Clearly these ‘Advisers’ were not telling their clients the redemption delays and you knew this, as client would not have invested. That is common sense and you can keep showing the returns going up if clients can never access their money!!! My client waited over 3 years and in the end has lost most of his money. It is a disgrace. Even more shocking, was a lot of this investment was not even new money, brokers struggling for business after the Financial Crisis just switched existing money across of their portfolios with the Life Offices and took 9% of their clients money (they had already been paid once). Most clients never saw the prospectus or knew this was an ‘experienced investor’ fund, but instead were just given a rate sheet showing ‘cash like’ returns – I mean how can that be right?? All I got was smart answers from you about not understanding the asset class as well as some megalomaniac comments. Both you and Venier seemed actually angry with me for meddling in your ‘great’ business model, as you ran around Asia cozying up to Advisers.. Life companies wanted to protect their market share so ignored and the advisers bought nicer cars and had better holidays and actually showed off about this on social media websites (many of those also have megalomaniac tendencies) – The whole thing was sick and you were ALL party to this.
I do not think I am some super intelligent person, so how did myself and a few others predict this constantly over a number of years. I am not on the Advisers side or the Life Companies side and certainly not your side and the Action Groups are just run by your former mates who were very rude to me, when I suggested the huge issues with LM 3 years before implosion. There was something very obviously wrong and for these assets to be valued 5c in the dollar, just shows what a disgrace this was and for that you are accountable. However for most advisers and life companies to act shocked and feel cheated is a disgrace also. You all worked in collusion, so clients never knew the reality when investing. I wish I had done more now, but I will not listen to the excuses from any of you people. I have reams of emails to you all, which I will publish and show your formally ‘matey relationship’ with advisers and life companies and how I was just the trouble maker then.
To conclude LM was a massive fraud where you fed the greed of these so called Advisers and which was sadly facilitated by the life companies who could have stopped this circus 3yrs and around $300m earlier. It is beyond belief that any of you have the audacity to act as victims at all. The real victims are real people who lost everything and shame on you all for doing that.
Please respond to this in an open email on your blog. As you know I have the evidence against all parties to back this up.