Cattle Ponzi alert

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This week in Gotham: the SEC has gotten a temporary restraining order against a ranching-investment scheme it says is all hat and no cattle.

The US securities regulator says Texas-based Agridime LLC and its owners — Josh Link and Jed Wood — have been running a $191mn Ponzi scheme selling “Cattle contracts” in 15 states.

It’s not a huge operation, but if a “Cattle contract” is a security that meets Howey test requirements, perhaps some crypto tokens are as well? Who knows!

At first glance this also seems like an interesting development in the jurisdictional division between the SEC and CFTC. But it was North Dakota’s securities regulator that gave the company a cease-and-desist order earlier this year, so the SEC may have some leeway here.

Anyway, here’s a relevant couple of passages from the complaint:

Readers may be able to guess the next line:

Besides Alphaville’s ongoing interest in the intersection of Americana and white-collar crime, it just goes to show that cattle-ranching Westerners, heartland dwellers and “simple country folk” like, say, Trevor Milton are usually quite a bit sharper than the international press would give them credit for.

In fact, this isn’t the only cattle financial fraud prosecuted in the past few years. And it certainly isn’t the biggest.

Last year a rancher was sentenced to 11 years in prison after he racked up more than $200mn in futures-trading losses and tried to cover his margin calls by invoicing a business partner for $233mn of “phantom cattle” he wasn’t actually raising.

And one area of Kansas experienced a cattle-market liquidity crisis in 2019, after a couple that owned a livestock-sale barn was charged with kiting more than $2bn in checks — leading to tens of millions of dollars of losses at local banks — and lying on credit applications.

We at Alphaville have already grappled with some of the horrors that Taylor Swift hath wrought. But all of this raises another, possibly more important question: what about Taylor Sheridan??

Further reading
— Trevor Milton’s smol bean legal defence
— Don’t worry, it was just a “scam”
— When will the beef cycle bottom?
— We need to talk about the CFTC