'Most eligible bachelor' accused of pump and dump scheme
By Paul Friedman
Oct. 3, 2002
Christian Grey is not your average Joe. The young entrepreneur from California is a minor celebrity. He was named 'most eligible bachelor' on Fox News, in no small part thanks to his dashing good looks and flamboyant lifestyle. He regularly appeared as a market commentator on their financial news segment.
It didn't take long for the residents in Palm Beach County, Fla. to notice their newest neighbour. At only 29, the self-made-millionaire had amassed a sizeable fortune. As the chairman and CEO of his multi-million dollar investment firm, Grey Investment Group, Grey appears to have it all. But things are starting to not look so good anymore for Mr. Grey. He is accused of defrauding investors in an old-fashioned Wall Street con, a pump-and-dump scheme - a lazy wall street trick of talking up the companies publicly to inflate the stock price before dumping the shares.
It was during a hot summer season when Grey, who graduated from Princeton, showed up in Palm Beach County in 2001 in a roaring McLaren F1 GT bearing the vanity plate "CPTLSM". He quickly started to raise eyebrows among the residents, a mostly white suburban population. The quietness that initially attracted Mr. Grey to Palm Beach, according to people who know him, was soon becoming too quiet for his own taste. Mr Grey would frequently take one of his outrageous supercars for a spin around the quiet neighbourhood, usually his shiny white Lamborghini Diablo. He was rumoured to own over a dozen sports cars. "It felt a bit showoff-ish, seeing him drive his supercars through our deserted streets." Mr Parker, a local shopkeeper and third generation resident, complained.
Not nearly as unsettling as when Mr Grey started buying up real estate, eventually acquiring an entire street and its eight houses. The noisy construction work kept neighbours up at night. "It started at 5.30 AM until late at night and even on weekends!" An elderly neighbour, Mrs. Gredditch vented in anger. She sold her house to move to her daughters house because Grey's incessant construction noise was keeping her up at night.
"He was just running around, buying up houses everywhere. It's like he wanted to own the whole town. People were just uncomfortable. Wondering what the hell he was up to." Skipper Morgan, a local newspaper salesman commented.
It is not the first time Grey has come under scrutiny. Investigators for the SEC have also been wondering what the Hell Grey has been up to.
Three years ago, Grey's company, Grey Investment Group, had made a killing: clearing over 400 million dollars by shorting a Biotech company stock called AnGen.
Christian Grey started his investment firm at twenty two, with a mere five million dollars. Developing it over the span of a few years into a billion dollar empire. At it height, the company employed around eight hundred employees with offices in the US, Hong Kong and London.
One arm of the Grey Investment Group was its financial investment fund, which charged clients high fees and even higher commissions, averaging higher annual returns of over twenty five percent.
Grey described his trading strategy as "ruthlessly aggressive", making trades when a certain event would act as a catalyst to the stock price, making the stock price move either up or down. Bringing his extraordinary success rate down to "a mix of intuition and financial prowess about the markets and where they will go." One of his long time associates, Ched Sterling, described his boss as "the Oracle of Wall Street." But while the Oracle of Omaha's strategy is to invest into blue chip American companies and hold the stock for a long period of time, Grey's investment strategy can be described as opportunistic.
"Christian is not a value investor. He doesn't care about the companies whose stock he buys. They mean absolutely nothing to him. He has no emotion when he trades. He cares about selling at a profit. He moves in and out of stocks with only one purpose: making as much money as possible." One former portfolio manager said in an email exchange about Grey.
But while Grey's winning trading streak might come down to gut feeling, the business model at his company was based on an aggressive accumulation of information. The company has been plagued by accusations of insider trading, but investigators have not been able to prove any wrongful doing so far. But that didn't stop to dissipate the word out on the street: that Grey's company culture if not encouraged, at least showed a high level of tolerance for insider trading.
During job interviews, Grey was rumoured to ask applicants, "Tell me something you've done, that was in the grey shaded area of legality."