A Fool and His Money

http://newcapital.squarespace.com/monoblog/a-fool-and-his-money.html

Thomas Martensson got off the plane one morning in Houston in 1998, as the Internet bubble raged.  He was here to raise money for his new venture, which he called Instore.com, and I had arranged for me and some other investors I knew to come hear his pitch.  Thomas was introduced to me by David, the ex-stepbrother of Adam, my good friend from college who swore that I absolutely, positively just had to meet and hear this extraordinary businessman and his “opportunity.”

If you’ve got good ears, and if you don’t before your first time, you certainly will after, you can almost perceptibly hear it in the voice of the promoter.  This was my first time, and I thought I could almost hear it in every one of their voices – in Adam’s, David’s, and in Thomas’s – but though they all seemed somewhat over-excited, they were all persuasive, and I agreed to hear the pitch.  Thomas, a Swede, was traveling to several US cities to meet investors, and we decided he would stop in Houston.  I would pick him up at the airport and meet at one of the hotels there.

If you don’t hear it in the voice, then you might see it in other things.  I remember thinking that his luggage was awfully nice, the absolute top of the line, the same with his winter jacket, but I overruled that too thinking it was just a European thing to have the nicest designer stuff.  Besides, David had told me that Thomas had been successful in his first venture, so that explained how he had money.

His presentation was smooth, except for a verbal tic that he had and a bit of a nervous laugh.  I overruled those too, choosing to give him the benefit of the doubt: who was I, a liberal, to discriminate over a verbal tic, and here he was making a business presentation in a language other than his first, something I had never even attempted.  Instore.com was designed to capitalize on Thomas’ contacts in the cell phone business, and was to provide a sales, distribution, and maintenance program for corporate cell phone fleets.  As Thomas described it, employees of large corporations received their phones from their companies, and it was a pain in the ass for their IT departments to manage those programs.  Instore was designed to outsource the rapidly growing corporate cell phone programs, and it had a leg up, according to Thomas, because of his deep contacts with the Swedish phone maker Ericsson.  It sounded good, and we promised to think about it.

If you don’t hear it in the voice, and you don’t see it in the luggage or clothes, then you might figure it out from the legal work, or lack thereof.  Legitimate startups get good lawyers to draft solid paperwork, often reams and reams of incorporations, rights documents, stock offerings.  Indeed, there are reputable law firms whose practices revolve around the creation of extensive documentation required to start a venture-backed company.  I was familiar with this type of paperwork, because I had previously backed a startup venture that was now doing well.  Instore, though, was “in a hurry” to take advantage of the “extraordinary” market opportunity, so there would be some paperwork but the detailed stuff would be forthcoming later.  Okay – I took a deep breath and accepted it.  We ultimately decided to invest a hundred thousand dollars in the latest world beating, earth-shaking Internet firm, Instore.com.

David would later insist that he himself had lost all his money in Instore, although he hadn’t actually paid for his shares, but had instead loaned some money to Thomas and received his shares as payment for rounding up American investors.  Of course, he told me that afterwards, after lying to me originally about paying for his shares.  He insisted that he was stunned and furious at what had happened, that he knew nothing about it beforehand, and he even hired a lawyer in Stockholm to pursue Thomas, though nothing ever came of it.  And in fact, Instore did hire people and put up a server.  I would occasionally over the months check the site to see how it was coming and I was always somewhat concerned that it didn’t improve more rapidly; it seemed to be the same pages each time I visited.  When I pressed, Thomas assured me that it was the secret sauce behind the pages, all the stuff linking the corporate customers to the Instore system, that was so critical.  He claimed they had some customers too.  David would accuse Thomas of making off with half of the $6 million that had been raised from investors, of using the money to party in San Tropez, buy a sports car, have a luxurious wedding in Paris for his wealthy French girlfriend.  Thomas claimed that all the hard work and failures at Instore had actually bankrupted him and he didn’t have a Swedish krona to his name anymore.  All I felt was degraded embarrassment, and I wanted to get as far from it as I could and forget it while at the same time always remembering it.  Like most good educations, this one was expensive.

I say it was my first time.  But really, now that I think about it, it was my second.  Curiously, my first one also occurred in Europe.  I was in college and traveling in Paris, staying in hostels and the like, and suddenly there was a card game conducted on a box in the street.  There was a dealer, and two players, apparently, like me, pedestrians from the street caught up in the game.  I should have heard it in the voices, especially since they kept changing languages, from French to German to who knows what, as they tried to find my frequency.  “American?” the dealer finally asked, and I nodded, and with that the cards went down One, Two, Three, and for 20 bucks I just knew – just KNEW – where the ace had landed.  I pointed to my card.  He turned it, and it was of course, anything other than an ace.  And just like that, in the blink of an eye, my money was gone.  And I suddenly realized that the two other players were not actually other suckers like me, but partners with the dealer.  For a moment I thought about demanding my money back.  I did a mental calculation: three of them versus one of me on some Paris backstreet, and $20.  I walked away, feeling the same degraded embarrassment I would feel ten years later over much more Instore money.  For a college student traveling in hostels, $20 was an expensive education.

And what have those and other educations taught me?

First, be initially skeptical of any investment opportunity.  Not to the point that you risk ultimately ignoring the opportunity, but to the point that you possess a good first line filter.

Second, be initially skeptical of anyone presenting an investment opportunity, including people you know well, for they may be fallible as well.

Third, you are better off in most cases paying a management fee to an intermediary, like a reputable fund manager, than venturing into a field in which you are a novice and about which you know little.

Fourth, listen to what your body is telling you – if the opportunity or the promoter feels wrong, they probably are.

Fifth, if you’re not sure or feel ambivalent or confused about an opportunity – don’t do anything, just take a pass.

Sixth, be careful with your capital – once it is lost, it may not be easy to replace.

Seventh, diversification can have benefits – unless an entire system has become fraudulent, which is possible, you may find some safety in a crowd.

Eighth, beware of rapidly rising markets, they draw fraudulent people and produce more frauds than any other market, as people get desperate not to miss out.  If you’re seeing the opportunity – whether it is Internet stocks, or houses, or gold, or whatever – on the front page of US Today, it may not be too late, but it’s probably getting close to it.

Ninth, study and follow the best, as they have a history of being able to smell fraud and avoid it.

Tenth, do not be greedy about anything.  Greed and ignorance are the two preconditions for a victim of fraud.

Eleventh, if it happens to you, don’t beat yourself up for too long.  Virtually everyone is defrauded at some point in their lives.  Make sure to learn from it.

I’ve no idea where Thomas Martensson is today, and I don’t care.  I’ve made successful investments before him and since.  One of the curious things about fraud, is sometimes you’re never absolutely sure that the promoter intended outright fraud, or something just somewhat shy of it.  Regardless, I’ve decided it’s better to leave nothing to chance, and I’ve decided I prefer absolute rectitude in all walks of my life: investments, politicians, friends, associates and so forth, because really, there’s not much that feels worse than that feeling of degraded embarrassment that you get when you realize you’ve been had.

I’m Leo Gold.  This is The New Capital Show.

Posted on Apr 3 by Registered CommenterLEO GOLD | Comments9 Comments

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Reader Comments (9)

Excellent description of the kind of frauds pulled independently upon individuals everyday but why stop there?

Someone steals $20 from you in a fixed card game and you’re outraged but what about the organized criminals that just stole $200 Billion from you and me through our National Treasury!

Somehow that’s OK – “those” guys must know what they are doing after all they are professional “businessmen”. It’s all right – they just made some bad “bets” and miscalculations and simply lost $200 Billion in the process. No BIG deal – Don’t worry, Be happy – it’s only $200 Billion. It was just an honest mistake as if anyone would ever “lose” $200 Billion on purpose? As if the ultimate con-men of this world would ever seek the ultimate prize – the US Treasury!

You know that they are when they can con you out of $Billions of your hard-earned taxpayer dollars and make you feel good about it and vote for them in the process. That’s the mark of the ultimate professional con-artist for you – just have to look at who is sitting in the White House today – the King of all Cons!

And if Ted Turner were President as you propose, then it certainly stands to reason that he would appoint his “best friend” Billionaire Micheal Milken to the Secretary of Treasury – and that’s a ticket worth voting for as if enough crooks aren’t already in charge. Why not put a convicted felon who along with Ted stole their fortunes from the public on the payroll and just be open and honest about it. Now that’s progressive – simply call a spade and spade and a crook and crook.

Your comments certainly pay credence to the new Golden Rule:
“He who has the Gold – Rules”! And you certainly blur the line between “businessman” and “conman”. So here’s a simple campaign slogan for you:

“Ted’s a Billionaire therefore Ted’s a good guy – Vote for Ted!”

Apr 4 | Unregistered CommenterDawn
I know you write that you don’t care… but Thomas Martensson is currently being chased by the Swedish tax authorities for yet another “investment opportunity” gone wrong with yet another set of embarassed investors left emptyhanded behind as he continues his life of luxury. Incredible.
Mar 29 | Unregistered CommenterParis
I adtually cant see from which year are these comments.
just wanted to add, Thomas did it again, he built a house contruction outfit, Next House, and he managed to fool again several people, inclusive me, as I was he agent for him in spain.

the company went bankrupt again, with also 6 mio euros loss. several customers all over europe are going against him and I think this time he went too far.

many reports have been filed at the police in sweden and lots of criminal has been committed by Thomas.

He managed to make an agreement with 32group, extremely healthy company, but we will do everything possible to stop this.

once this man has to be stopped.

We are developers based in Suisse. Have received this link from our partners. Like all stories there is two sides. This is what We have found out after reading the comment made by a PETER LOFFELHARDT. We also know the Next House concept developed by Thomas Martensson and his Company. Like many others, We have visit Sweden, the Next houses and the office in 2010. Can only conclude, what has been done by Next House and its team is extraordinary in terms of innovation in an otherwise very traditional industry. This should be clear to anyone looking at the achievement.

We also are familiar with Mr PETER LOFFELHARDT, and his different ventures in Russia, Brazil and Spain. Since Mr LOFFELHARDT have tried to contact some of our partners, with some highly questionable information about Next House and Mr Martensson. We have made some inquiries about Mr LOFFELHARDT and his Company NELL2004, thru our Lawyers in Madrid, SPAIN. The information on this research made on Mr LOFFELHARDT does not give a very credible picture of him and his Company, on the contrary, our Lawyer have been very clear, not ta have any contact with Mr LOFFELHARDT

We also have in our hands documents between Mr LOFFELHARDT his Company NELL 2004 and Next House, it’s clear that Mr LOFFELHARDT and his Company failed to pursue its commitments towards Next House, based on this Next House cancelled the agreement as an agent for Spain that Mr LOFFELHARDT had thru his Company NELL2004. According to the information Mr LOFFELHARDT telling to the market that he has been doing development in Spain for more than 20 Years and have done several larger project. The information that was given to us from our Lawyers, thru public sources shows a very different picture. Mr LOFFELHARDT and his Developing Company NELL2004 SL have not even reach a revenue mounting to 100K€ in total over the last 5 Years. The information shows that Mr LOFFELHARDT and his NELL2004 are under investigation by the Spanish Tax Authorities and the Police since a former Client in Spain have made a report to the Authorities for claimed fraud in Connection with a developing Project in Barcelona, Spain.

Our inquiries also shows that Mr LOFFELHARDT have created a new Venture, a Company based on IP rights and Drawings stolen from Next House office in December 2010, his partner and board members in this new Venture are a Person convicted and jailed for raping a Young girl in Stockholm last summer in 2010. The other partner, a DAVID NORDH which also is the CEO of the Company is wanted by Police in Sweden regarding the theft of the drawings from Next House, also noted is that Mr DAVID NORDH changed his personal name 4 times, last was in June 2010, after a bankruptcy scandal i the Company CARPENTIA AB, there is an ongoing court case in YSTAD, SWEDEN between DAVID NORDH and several of his Suppliers, claiming that a embezzlement in connection with its bankruptcy. The Lawyer in charge also represents an another group of victims in this Bankruptcy against Mr DAVID NORDH, including the Swedish Church in SVEDALA.

In Suisse, there is an expression, You can judge a person by looking at his friends and Partners, unfortunately this does not give Mr PETER LOFFELHARDT lot of credibility. And one should also question Mr LOFFELHARDT’s intention in publishing a comment like in this blog.

Axel Schmidt

May 4 | Unregistered CommenterAxel Schmidt
Stay far and far away from this man. He not only tricks the investers but also everyone connected to him except a few chosen people that follows him around. He has tricked people all over the world and he always manages to get away legally. People actually make fun of him but sadly a few new people gets suckered in most of his new projects. These days his so called “fancy” wifes family really hates it that their daughter is married to him.

If you understand swedish you can find lots of info about him here. https://www.flashback.org/t1252508p24

May 6 | Unregistered CommenterJohan
My wife and I ordered a house from Martensson, we paid our first 30% for the house, not only the house was never built but we never got our money back. We have put a complaint against the company but we were informed that the company has gone bankrupt so we are after Martensson, but he doesn’t have an address in Sweden and apparently doesn’t spend time in Sweden.
Nov 29 | Unregistered Commenterhubert
I want to warn again everyone who deal or plan to with Peter Loeffelhardt.He seems a rather charming and polite person but all this in only a mask on a face of completely crimnal man. He may get under your skin as a busom friend and then one day he will leave you with empty pockets, disbelief in mankind and taste of nausea. I worked with him in Russia and Holland. He and his notorious partner Dirk DeGeus have stolen personally from my company at least USD 3 mln. They have falsely bunkrupted a very prosperous company ICD Group Ltd (in 1995) and by assistance of Dutch banruptcy lawers have concieled a part of the estate in Russia. Totally they managed to steal only in this procedure at least USD 45 mln. Of course he was blacklisted in Russia but I see now that he appereared again in Europe and Spain after his brasilian adventures. Beware, the guy is a practical crook!
Thomas has started again http://www.gofindittechnologies.com and now lives in London!!
Sep 6 | Unregistered CommenterJames
Thomas is alive and well and doing what he does best – living the life of luxury via other peoples money. He’s still a failed businessman, still a guy telling new girlfriends he’s “late 30’s” (when in fact he’s touching 50…), still a guy looking over his shoulder every day, still a guy who knows LOTS of people but has ZERO friends.

He’s a conman and people fall for it.

The good news is he’s not smart so he’ll continue to lurch from country to country, venture to venture as he searches for his dream – to be rich.

Yes that’s it folks, he wants to be RICH.

And if he can’t be rich then he has to give you the illusion that he is.

What a superficial, shallow chancer.

Apr 22 | Unregistered CommenterJoe90

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