Let’s discuss an ambitious African immigrant named Obawtaye Folayan who appears to have a very big American dream but an unfortunate approach to getting there.
Starting in the mid-90s Folayan started laying down some real markers on the road to success, picking up a finance degree from Delaware State University and later, a masters degree in education administration from New Jersey’s Rider University in 2002. Two years later he would become principal of a school in Bridgeton, New Jersey.
But Folayan was a restless sort and moved on from the principal’s office to start a host of businesses, from landscaping to a for-profit education initiative.
Like many a fellow before him, Folayan heard the siren song of Wall Street, and in 2012, he set up Folayan Financial Holdings, a Delaware-chartered company with some tall designs on the world of consumer financial services.
Credit where it’s due, Folayan Financial Holdings sounds professional enough.
Then you take a look at the website of the company and the alarm bells start screaming.
Folayan Financial’s website should strike anyone familiar with how Wall Street markets itself as one of two things: Either an unfinished template, with a series of random names, words and titles thrown together like a poorly tossed salad before it is properly completed, or it is a crude parody, designed to elicit laughs from knowing finance industry insiders.
Consider the names and titles of the company’s managers: “Adam Smith” is “Main Manager,” and he might--or might not be--related to “Jennifer Smith,” who has the very un-Wall Street title of “Team Manager.” Rounding out the senior ranks is Information Technology chief “John Doe” and Anna Brown, “Attorney.”
As noted above, Folayan has patterned itself after a Bank of America or Citigroup, offering a universe of financial services, like retail investments, investment banking, insurance, “holding services” and legal advice. Unlike Bank of America or Citigroup, which actually do those things, the tabs on the company's website go nowhere.
The chief executive is the aforementioned Obawtaye Folayan whose days patrolling school hallways and issuing detentions are long past. The site says he personally oversees international assets worth “$4.4 billion.” Despite living in New Jersey, Folayan has never felt the need to obtain any securities industry licenses or register as an investment advisor.
He’s not alone, however, as “Isaac Rothschild,” a “Senior Account Manager” with 30 years of global investment experience, is helping manage the assets and run the business. Rothschild, a surname with a profound lineage in finance, seems to have done the impossible in an internet age, putting together a 30 year career that includes holding no licenses or warranting any mentions in any Securities and Exchange Commission or Financial Industry Regulatory Authority filings. (Rothschild will make another, rather spectacular appearance below.)
Despite clearly seeking to do business with the U.S. investing public, Folayan Financial has no licenses and is registered with no U.S. regulator or agency; a search engine scan for some of these billions of dollars worth of transactions and assets turns up nothing. The company’s headquarters is in a virtual office complex in Mt. Laurel, New Jersey. It says it has been doing business since 1999 but its bare bones filings indicates it was organized in 2012.
A little additional digging turns up some very troubling things about Obawtaye Folayan. In October 2012 he pled guilty to simple assault; the New Jersey Board of Education stripped him of his teaching certificates in September. The idea of his considerable wealth is unlikely: He and his wife Malika--they appear to now live apart, according to a databases examined by the Southern Investigative Reporting Foundation--have nine judgements between them for unpaid consumer debt and last year lost a Pompano Beach, Florida property to foreclosure.
Having a comically ill-conceived website is not, of course, a crime. Where things get interesting is sussing out whatever it is a pair of companies Folayan Financial owns, New York Stock Options and money manager NYSOHedge, are really up to.
Establishing a connection between Obawtaye Folayan and the two companies required some sifting. Here's how the Southern Investigative Reporting Foundation established the links: The main number of New York Stock Options is 877-935-8468, a number that has been used by Folayan Financial. Moreover, in September 2012, the virtual office where Folayan Financial rents space posted a message to its Facebook account welcoming New York Stock Options and Folayan Financial. Finally, Folayan Financial's website had key components of its directory left exposed, and its index and old payment processing details firmly tie the companies.
There are many excellent reasons for investors to stay far away from New York Stock Options and NYSOHedge, not the least of which is the fact that its strategy of trading binary options is assuredly spectacularly ill-suited for the passive retail investors they are seeking.
New York Stock Options circumvents the obvious complexity of the securities by ignoring the matter completely, instead making a pitch to prospective clients that is simplicity itself: trading binary options --no amount of capital is too small--is effectively riskless because both New York Stock Options and NYSOHedge employ hedging strategies that "Insure against loss of principal.”
It is no easy feat to count how many laws, both written and unwritten, this approach flouts.
On the off chance that investing without risk to capital wasn't enough, NYSOHedge says it posts “average yields” of up to 123 percent in certain accounts; others book average "yields" of 84 and 90 percent. By way of comparison, here is Bloomberg's listing of the top-performing large hedge funds. (Shortly before this story was released, NYSOHedge took down its website.)
To evangelize the potential binary options trading pool, NYSO and NYSOHedge use video testimonials, satellite radio advertisements and YouTube videos to spread the word. There are plenty of eyebrow raising issues with the videos, such as the settings in generic, featureless offices, and the lack of detail about how the clients suddenly managed to amass compelling wealth through New York Stock Options. Visually, they are oddly sterile, with this video suggests 1980s pop icon Max Headroom more than it does the benefits from an esoteric options trading style.
Regulators might find it interesting that the people in the videos speak U.S. accented English. This matters because when the Southern Investigative Reporting Foundation sought comment, David Goldberg, a senior executive of New York Stock Options, said the company is a startup in the U.S. and has no U.S. customers. When pressed on how the company's absence of U.S. investors was contradicted by the enthusiastic U.S. citizens in the videos, Goldberg declined further comment.
Where NYSOHedge might potentially be taking in some investor capital is through its recently announced decision to accept Bitcoin--a peer-to-peer crypto currency--for its managed investment accounts. Bitcoin is a controversial asset class (one of bitcoin's primary exchanges, Mt. Gox, is in duress and has not allowed withdrawals for several days) but for Folayan, the ability to move bitcoin assets rapidly across the world without prying compliance staff asking questions is perhaps attractive. Regardless, marketing to the BitCoin community seems central to the funds future since two weeks ago Obawtaye Folayan registered the BITX.US domain name.
The management of NYSO and NYSOHedge, like Folayan Financial, appears in no U.S filings; like the parent company, Isaac Rothschild is again listed as a senior manager, this time in charge of managing accounts over $100,000.
From a regulatory standpoint, New York Stock Options and NYSOHedge are complete ciphers.
Bizarrely, New York Stock Options insists repeatedly on its website that it is a member of the Independent Financial Regulatory Authority, a regulator whose influence is now more metaphysical than real since its website is no longer active. (The Internet Archive's WayBack Machine had a cache of its site, fortunately.) To start, the phone number is now disconnected and the address given, 22 West Washington Street in Chicago, is another virtual office. A woman answering the phone for the office owner told the Southern Investigative Reporting Foundation that the Independent Financial Regulatory Authority had been gone since July “if not before that,” and had left no forwarding information.
In a series of email exchanges, New York Stock Options executive David Goldberg argued that not having a U.S. regulator--when operating on U.S. soil or planning to soliciting U.S.-citizens--is not an issue since New York Stock Options is registered in Belize and doesn’t have any U.S. clients yet. Moreover, he insisted that New York Stock Options complies with all regulators in the jurisdictions it does operate in. He was scornful of a reporter's query about regulators in North America and Europe having no record of his company.
"You obviously think America, Canada or Europe are the only place on earth firms are regulated," said Goldberg. He then ended the conversation by accusing the Southern Investigative Reporting Foundation of being a front for BlackRock, the giant asset management firm. He did not elaborate on this theory and an email from Isaac Rothschild noted that the firm would not be commenting further.
Goldberg's reference to New York Stock Options registration in Belize might not instill much confidence in its governance. According to the International Consortium of Investigative Journalists Offshore Leaks database, New York Stock Options address in Belize is a mail drop used by several other offshore entities to shield assets and business activity.
During its brief, likely imaginary lifespan, the Independent Financial Regulatory Authority certainly tried an entirely different approach to guarding customer assets than its peers at the SEC or FINRA, and planned a $100,000 per plate “IFRA Awards Dinner” gala to celebrate the companies it did not regulate at the Chicago Waldorf Astoria. One of the main attractions of the event was the chance to meet “multibillionaire” and "part-owner of New York Stock Options" Isaac Rothschild. (A representative of the hotel told the Southern Investigative Research Foundation that she had no record of this event.)
Given the above, it is perhaps difficult to be shocked at the news that New York Stock Options is planning to join Goldman Sachs and Morgan Stanley in the ranks of publicly traded brokerages. A “preliminary prospectus announcement” posted on its website says a sale of six million shares at $25, raising $150 million, would imply a $5.3 billion valuation.
Getting the sale done though will be no mean feat.
With a syndicate of Folayan Financial Holding and Turner Securities LLC as "lead joint book running managers," and “Thompson LLC, Phillip Davis, Price, Steinberg & Smith Incorporated, Steven Goldberg & Co. and Isaac W. Rothschild & Co. Incorporated” there certainly are enough firms in the mix, it's just that none of them exist.
The Southern Investigative Reporting Foundation went to great lengths to get comment from Obawtaye Folayan and New York Stock Options during this story.
Moreover, given the vast incongruities and departures from securities industry norms our reporting uncovered, we firmly communicated our deep concern about the legality of many of its business practices.
Getting someone on the phone was fruitless: repeated calls to all of the obtainable numbers for Folayan and his companies (from public and private databases) ended in disconnected phones or voice mailboxes that were invariably full. Other phone numbers we called for New York Stock Options included a Magic Jack account that had been discontinued and a Google Voice mailbox where repeated messages left for Folayan and his colleagues were not returned.
A series of email exchanges, referenced above, with New York Stock Options executive David Goldberg resulted in little substantive discussion; after initially agreeing to call the Southern Investigative Reporting Foundation, he did not follow through. As noted, the email discussion ended when Goldberg accused the Southern Investigative Reporting Foundation of colluding with a giant money manager.