Kiting: ( was *Really* bad week for SCO)

[James Knott]

Another scam was to get non personalized deposit slips for your account, 
and slip them in with the generic deposit slips at the bank counter.  An 
unsuspecting customer might use your slip, when making a deposit, but 
the money gets put in your account.  That's one of the reasons the 2 
types of deposit slips have a completely different layout.


Gary Layng wrote:
> That isn't precisely a kiting scheme, but it's pretty close.  It's actually
> a computer fraud case.  It depended on the technology of the time (the
> 1970's, I believe).  He had a printer friend print cheques with the logo of
> the New York bank, but the bank identifier in the MICR code at the bottom
> was for a California bank.  Those cheques went back and forth between the
> two Federal Reserve districts for months before the scheme was uncovered, by
> which time the perpetrator was long gone.
> 
> Classic kiting is what brought down broker E.F. Hutton (remember their ads,
> "When E.F. Hutton speaks, people listen"?).  This company was extremely old,
> dating back to before the 1907 California earthquake, and had a great
> reputation for honesty - at least until they got caught.  It died
> ignominiously in the early 1980's.  The guys running the scheme within the
> firm would scour the States for obscure little banks where the cheques would
> remain in the float as long as possible.  It was quite the scandal at the
> time.
> 
>  
> His Lordship Mayhem
> 
> -----Original Message-----
> From: owner-tlug-lxSQFCZeNF4 at public.gmane.org [mailto:owner-tlug at ss.org] On Behalf Of Peter
> Hiscocks
> Sent: Tuesday, December 09, 2003 12:04 AM
> To: tlug-lxSQFCZeNF4 at public.gmane.org
> Subject: Re: [TLUG]: Kiting: ( was *Really* bad week for SCO)
> 
> 
> I heard of one kiting scheme that was finally discovered when the magnetic
> ink on the cheque wore down to the point that it could no longer be read by
> the cheque-reading machines and had to be handled by a human. Apparently the
> cheque had been going back and forth across the continental US for several
> weeks before that happened.
> 
> Peter
> 
> 
> On Mon, Dec 08, 2003 at 11:52:49PM -0500, Gary Layng wrote:
> 
>>I think I can google something up, but for now:
>> - kiting is illegal.  The scheme depends on how long it takes cheques to
>>clear the central clearing facility that all banks share.  Imagine you
> 
> have
> 
>>two bank accounts with, say, $50 in each.  You cut a cheque from your
>>account in Bank 1 for, say, $5 million, and deposit it into the account
> 
> you
> 
>>have in Bank 2.  At the same time you also cut a cheque from the Bank 2
>>account and deposit it into the account in Bank 1.  When the cheques
> 
> clear,
> 
>>you have enough money to cover them.  You get the interest on the $10
>>million dollars you had for two-three days in the two accounts.
>> - Margin is perfectly legal.  "On margin" means that you borrowed money
>>from your broker to buy shares.  Typically the broker lends you up to
> 
> about
> 
>>75% of the value of the shares.  If the value of the shares drops 25% you
>>get a "margin call" and they can sell the shares.  You're leveraging your
>>potential capital gains by borrowing the money, but it's quite dangerous.
>>
>> 
>>His Lordship Mayhem
>>
>>-----Original Message-----
>>From: owner-tlug-lxSQFCZeNF4 at public.gmane.org [mailto:owner-tlug at ss.org] On Behalf Of Byron
> 
> Sonne
> 
>>Sent: Monday, December 08, 2003 7:30 PM
>>To: tlug-lxSQFCZeNF4 at public.gmane.org
>>Subject: Re: [TLUG]: *Really* bad week for SCO
>>
>>
>>>its stock price may jump to $50, and if you hold -100 of them, you'll
>>>now have to pay $5000 to close out your position, and you're in the hole
>>
>>big
>>
>>>time.
>>
>>Does anyone have a link to a site or some docs that explain, to a putz 
>>like me, what all this various financial wizardry is?
>>
>>I've seen shorting briefly explained here, but what about kiting, 
>>selling on margin, etc, and various other techniques and scams? I'd like 
>>to know but I don't have the inclination to read entire books about this 
>>stuff, or become a CPA or something.
>>
>>Later,
>>B
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>>The Toronto Linux Users Group.      Meetings: http://tlug.ss.org
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> 
> 


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