Geek magazine hacker daily blog

1 year, 9 months ago
As the 27-year-old young man earned several millions from "financing of a deadly spiral" of cheap events

At the end of last year Joshua Sezon came to a boxing ring of Providence to the applause of two thousand viewers. It went after the actor Miles Teller, and the crowd was made by mass meeting: so there took place shooting about boxing from the director of the drama "Boiler room" [English Boiler Room]. Sezon had to play a bit part of the person from the boxer's environment as he became the producer of the movie together with Martin Scorsese and financed shootings of a picture. Now he is 27 years old.

In December upon termination of shootings Sezon went to Malaysia to celebrate Christmas with the girl, Rachael Mari Thomas's model. He made repair in the penthouse in Traybeke, and also opened sound recording studio in London to help to write an album to the Israeli singer and the actress with whom its Magna firm described by it as the international investment company signed the contract.

Six years ago Sezon lived in the house on Lond Island with parents, worked as the clerk in the law firm specializing in collecting debts and dreamed to become a pop star. After a while the friend of his family told it about one cunning which as consider many, brought it millions in stock market. He does not speak, than is engaged and how many receives, but, judging by reports of tens of companies, Magna provided them investments for the sum more than 200 million dollars since 2012.

The season, whose tattoos on hands hides a strict English suit, calls itself the investor self-educated person. In his company about 30 employees in spheres of trade, venture business, music and cinema work. "I am not going to disclose details of our work", – he said in the interview which was conducted in January at its office on the 16th floor of one of buildings of the business center of Manhattan. – "We create the companies and we invest money".

Actually everything is not so simple. Sezon found a method of redemption of stocks (in more detail about work in stock market read here) at the companies which are in a difficult or desperate situation with huge discounts, in turn, granting them loans. The Magna company concluded bargains, at least, with 80 companies. Events of 71 companies from 80 fell from the moment of providing investments. Sezon still could get profit as terms of transaction allowed it to exchange debt securities for events with the fixed cost. Regardless of where trade in these shares, he buys them cheaper.

Magna acts as the pawnshop acquiring cheap shares of little-known ventures which resale is performed definitely not by rules of the New York stock exchange. His clients were among the miner extracting copper ore allegedly the inventor of mentally managed phones and at least two managers, after accused of fraud is from Chile. They came to Sezon and sold a large number of the events for a small amount of money. Often they understood that the transaction, most likely, will not bring anything good to their shareholders.

As the 27-year-old young man earned several millions from "financing of a deadly spiral" of cheap events

If the stock value falls even below before Magna is able to output the investments, the companies should sell even more shares, and all to eliminate Sezon's risks. Critics call the similar phenomenon "financing of a deadly spiral" because in this case events depreciate. Other experts claim that sometimes the investor receives twice, three times or even by 10 times a large sum only several months later.

Business in itself is legal, however the loopholes in the legislation used in it on securities are applied by the most cunning banks and hedge funds. At least, six other creditors working with the companies suffering crash were taken to court by the Commission on securities and the exchanges (SEC) for violation of the rules of a dumping of events and several other laws; one creditor was arrested by FBI. Sezon came off clear, and he had no problems with the authorities. Now he earns from "a deadly spiral", expanding a field of activity of the company and turning into the magnate of show business.

Being a son of the Israeli immigrant working as the contractor, Sezon grew up in Pleynvyyu, the working settlement of Lond Island in an hour of driving from Manhattan, and lived in the ranch house near Siford-Oyster Bae Highway [English Seaford-Oyster Bay Expressway]. At the age of 10-11 years together with local boys it based a rock group under the name The Descent. They performed covers on a song of Blink-182 group, and he sang and played drums, a guitar and a synthesizer.

The season opened recording studio in the cellar of the house of the parents and began to write music for the group. The Descent had success. On the second year someone sent their records to Trevor Price, the defender of the Denver Broncos command weighing 120 kilograms, in addition, who was engaged in financing of different musical collectives. It arrived to Lond Island in order that the group signed the contract with its sound recording studio, but for a start he needed to discuss everything with concerned parents of musicians. "I sat in a drawing room together with five Jewish families which surrounded me and began to ask on a possible amount of money", – he tells. – "It was just ridiculous". According to Chris Antonelli, one of participants of group, Price gave to Sezon and other members of group 5000 dollars to everyone, and all of them began to put on as school rock stars.

"We called it Rocker Friday", – Antonelli is recognized. – "I wore a grandmother's mink coat and sunglasses, and Josh carried a boa".

The Descent submitted the numbers to directors of large labels, however other children whom Sezon and Antonelli took to themselves, were not so good. "All of them only spoiled", – Price tells.

"In group noticeable recession was observed", – Antonelli claims. – "All waited that we will become superstars, but it did not occur".
The season entered Hofstr's university located nearby and remained to live with parents. Its second group, Vibes, was less successful and Templ by Beth Am who is in Merrika, the State of New York acted with the best shows at school. Michael Morgan tells that Sezon was eager to achieve the next resounding success.

"When you have a contract with studio, and you study at school, your attitude towards success has to change", – Morgan considers. – "You speak to yourself: "All right, it is possible. What now? What's next?"

The season was arranged in a delivery service of one of Asian restaurants, carrying I go on the black Mustang. Later it began to file documents in firm on collecting debts. Morgan claims that they together played sports every day in the local Jewish communal center: now here children from Joshua A. Sezon's gymnasium renamed after a donation in 2013 play basketball.

In 2009 at one of entrepreneurship lessons at university Sezon suggested to deliver sand from Israel and to sell it under the name "Sand from the Holy Land" to collectors. It liked the documentary of 2006 under the name "Secret" recommended by Oprah Winfrey and shot based on the book about self-development and power of positive thinking. One of friends Sezona notices that he trusted in "the law of an attraction" from the book: how it is possible to reach anything, having imagined as it comes true.

So Sezon explains that almost the same happened also to him. He told that he had at that time a rest with a family in Puerto Rico and read the book "Reasonable Investor" written by Bedzhamin Graham in 1949 and which is often mentioned by Warren Buffett as a source of his inspiration. "Probably, at that moment my life changed", – Sezon is recognized. – "At first I read it once. Then, reading its second time, I wrote out basic provisions from the book which became afterwards my guide to writing of the interpretation".

The season claims that after that in the same year it doubled the sum presented to it on the bar-mitsvu, having invested money in "blue chips". "I understood that I, perhaps, possess capabilities to investment", – Sezon tells. He borrowed pension savings at mother, took "minimum six-digit" the loan from the friend of the family and founded the Magna company, without getting up. According to Sezon, business expanded, and rumors that Magna can provide financing to the small companies went.

"Growth happened gradually and continuously", – he tells in the interview taken in January. – "Frankly speaking, I cannot remember anything specific from what then occurred".

I still do not understand how the guy from Lond Island trying to become the musician earned practically suddenly millions from investments. The legal claim of 2012 in which the financier by the name of Yosef Kakhlon accuses Sezon of theft of its business model caught sight to me, however Sezon only told that they did not talk long ago.

In the Network there is something else about Kakhlona. Its number is not in the telephone directory, but in the claim its address therefore I decided to go to his house which is in Greyt-Nek, the State of New York, the prosperous town on the northern coast of Lond Island was specified. White Range Rover was parked on an access track near a brick mansion in colonial style which last year was sold for 6,3 million dollars.

From within the dance music reached. The thin man with the smoothed dark hair and a gray-haired bristle opened a door and told that Kakhlon is absent the house. Next day I received the e-mail which said: "My name is Yossi Kakhlon. I heard that you look for me". We agreed to meet at restaurant in Manhattan, and the same man with the smoothed dark hair came in due time. As a result it turned out that it and there was Kakhlon. "It is pleasant to see you again", – he told. Then he pulled out a pack of ten - and hundred-dollar notes to pay for gin with tonic, and told me a story about how he got acquainted with Josh Sezon and trained it.

As the 27-year-old young man earned several millions from "financing of a deadly spiral" of cheap events 48-year-old Kakhlon emigrated from Israel too. Having arrived to Queens in 1989 and having worked the taxi driver there, he earned the decent sum, having early entered the market of computer games and financing dealer car centers. He employed the father Sezon for housework and soon made friends with a family, inviting them to himself for the weekend. Once on Passover Josh won the traditional game "hide matzo" which usually brings to the winner of 1 or 10 dollars, and Kakhlon, as he said, gave to the boy of 1000 dollars.

Approximately in 2009 Kakhlon learned that Sezonov had financial difficulties. He told Sezon Sr. that he can help. "I told: "Bring the son here, I will teach him to earn money", – Kakhlon who at that time was already earning from cheap events remembers.

It is considered that formation of the market of cheap events began with fight of brokers who traded in the shares which were not accepted by the New York stock exchange. In 1920 in article of the Munsey's log of such brokers called "by close accumulation of beings, apparently, people" and auction at which sold a doll with events inside was mentioned.

Cheap events for this purpose also exist that, say, the cunning driller who is going to drill an oil well could earn money necessary to it without need to get the admission to trade at the exchange. They meet desire to possess the mechanism which would double or trebled attachments with little effort.

This sector of the market has doubtful reputation: many admissions are counterfeit. At best the normal guy with some idea can send them, and often this idea consists in fund raising from which he will be able to pay himself a high salary. Other admissions to trading belong to these companies to which the large exchanges refused because those are on the verge of bankruptcy.

Kakhlon paid brokers that those found in the market cheap events with a high trading volume and then learned from the companies whether they are going to issue new stocks. The companies which are on the verge of bankruptcy cannot publicly trade in new shares by a traditional method, having secured with support of the relevant investment bank because it too expensive, and the cost of securities quite low. But they can sell them to private investors like Kakhlon. The companies provide it very high discounts, and it right there sells these events in the public market, often doubling the initial sum due to "dilution" of other events. Usually laws prohibit these to be engaged, however Kakhlon found out that the State of Texas is an exception. It registered there the company while itself worked in New York.

Kakhlon tells that he showed Sezona how to trade in this way, and after – how to break off the contract that nobody could accuse him of a crime. "I will teach you how to do business, but as soon as you begin the business, we cannot contact more", – he told Sezon. – "In this business I have no friends". In official papers of the company it is specified that Sezon registered Magna Group in Texas in 2010, at the same time using the same mailbox, as Kakhlon.

As soon as Magna began the work, the younger brother Sezona by the name of Arie gave up study at Buffalo University and began to work together with it in the house of their parents. They cleaned a table for the sewing machine from garage and put it in a bedroom Sezona for Arie. Brothers quickly earned enough money to move to office building on Ganover Square, 5 in Manhattan, and employed command of "police dogs" for search of "victims".

"In the company at least two persons generally made cold calls to other firms found them in the Internet", – John Perez who worked in Magna several months in 2012 as the assistant manager on sales tells. – "Two others concluded bargains". One of sales agents Sezona, Arie Morris, took himself the alias "Michael Goldberg" and was represented so to time of telephone conversations. In 2012 on the website Magna Goldberg was registered as "the director of department of structural investments". Clients say that it was pleasant to communicate with it.

Magna were not only who made calls to such companies. Heads of the companies selling cheap shares claim that as soon as the trading volume of their events became high, they were filled up with calls by the young sellers and importunate bank employees who were interested whether they need cash; and often they answered that they are necessary.

Such activity in the market drew attention to SEC. In the summer of 2012 the Commission filed a lawsuit against Kakhlon and other financiers who were engaged in trade in cheap events, claiming as if their smart opening actually that was not. SEC considers that Kakhlon earned 7,7 million dollars from purchase of cheap stocks with huge discounts and carrying out a public dumping of events. Kakhlon claims that he broke nothing; business still is in consideration.

Kakhlon closed the fund in hope that his former pupil will help it with payment of legal costs. Sezon did not begin to do it and, according to Kakhlon, strongly offended him, without having shown at all respect for what he taught Sezon to. As a result Kakhlon filed a lawsuit against Sezon, having declared that that broke off the relations with the broker; the judge rejected this claim.

"I only want to help the companies, the word of honor"


When I asked Sezona about Kakhlon's story, he told that it is a lie. "Nobody taught me to this business", – he writes in the e-mail. If the friend of his family also inspired him on studying of cheap events, he considers that activity of Magna has nothing in common with Kakhlon's work, the general mailbox – only coincidence, and he never won 1000 dollars during Passover.

No Magna is mentioned in one of reports of SEC, and Sezon never had problems with the Commission. Practically all reporting of clients of firm indicates that transactions were carried out more skillfully, than it was done by Kakhlon.

Paul Riesz's transaction with Magna in July, 2011 was not remarkable. The company of the businessman from New York, Pervasip, was engaged in application programming for communication and Skype had to compete, but its budget was reduced to 100 thousand dollars that would hardly last for a month, considering the speed with which the company lost the money. According to Riesz's statements, a certain Michael Goldberg from the Magna company called him and suggested to take the loan, and at the same time he did not even ask to show him the application.

"Everything that they wanted to find out is what liquidity of our events", – Riesz tells. – "It was interesting to them how many money we spend every month".

At first sight, the loan from Magna in 75 thousand dollars seemed the quite good sentence. It represented issue of "the 8 percent convertible bill of exchange" that meant [annual] return of 8% of investments and granted the right to Sezon to transfer it to events. By a small print it was written that in case of failure to pay a debt by the Pervasip company within six months, the creditor could make this transfer at a discount of 45% of market value. Thus, irrespective of where the shares Pervasip were traded, the company would have to issue to [firm] of Magna of an event worth more than 136 thousand dollars – 82 percent return of means of everything in six months. In fact, Magna ensured the fixed return.

The below the stock value fell, the more Pervasip owed [company] of Magna which could receive the money. Magna risked only if players of the market would refuse to take the shares Pervasip at as much as low price. "Unfortunately, everything was reduced only to the money which is available for us", – Riesz tells.

Pervasip did not manage to extinguish debt and gave the stocks Magna with the stipulated discount in January, 2012. Riesz claims that he has no papers testimonial of that how many earned Magna from it. The stocks Pervasip for a while rose to 3 cents apiece, and now they can be purchased for 0,009 pennies. According to Riesz, he is still called by creditors and offer even more money.

The analysis of 80 reports sent by [company] of Magna to government bodies showed that after carrying out the transaction with Magna the value of the stock of the company on average falls for 55% in a year. The majority so never also recover and, eventually, are forced to trade in them for thousand shares of a penny or even less. Sezon claims that his company is not guilty of anything.

"I only want to help the companies, the word of honor", – he says. – "We would never begin to make the investments if we knew that our activity in the market can lower the cost of the company [in which we invest]. It would be unprofitable to us".

In January, 2013 Sezon purchased a penthouse in Traybeke for 4,2 million dollars. He changed from the Mustang on sports Mercedes Benz worth 200 thousand dollars as the schoolmate Antonelli reports it. It began to appear quite often in Lavo, night club in the center of Manhattan popular among different celebrities. "Thursday through Sunday it can be found in club in an environment of attractive waitresses", – Antonelli tells.

The most outstanding success came to Magna in 2013 when the firm helped the Greek transport company Newlead to avoid bankruptcy. The company which was earlier owning 15 tankers and container carriers had four vessels. It had enough cash for compensation of monthly operational costs.

But here character of the transaction sharply exchanged: instead of allowing Newlead a loan, Magna paid several creditors of Newlead for the right to recover old debts of the company. After Magna submitted a claim on Newlead for collecting debts, both companies quickly came to the agreement under which Newlead undertook to provide to Magna a discount for events which could be purchased at once. The court of the State of New York approved this agreement.

In the written statement filed Sezon claimed that Magna together with the unnamed partner extinguished debt in the amount of 45 million dollars and caught the events afterwards sold for 62 million, and it means 17 million dollars of profit without expenses.

The technology of financing is considered legal until the paid debts are real, and the financier does not leave the income from sale of shares in the company if to trust Mark Lefkovittsu who also carried out financing of cheap events and was accused in 2012 of violation of these rules. "The essence is that this equipment needed to be used for reliable transfer of debt obligations in securities", – Lefkovitts cooperating with FBI tells. It quickly completed the interview, explaining it with the fact that have to pronounce it a sentence soon, and it has to find out something from the assistant from FBI before to declare something.

Financing, maybe, also rescued Newlead as the company (it avoided bankruptcy and purchased several new tankers), but it led to depreciation of its events. The company was ruined so that if you acquired its shares for 3 million dollars in March, 2013, just before Magna attachment, then would be left without penny. Taking into account results of consolidation the stock price makes $0.0000000002. The Newlead company refused to comment on a situation.

It is difficult to tell how many Magna earned since 2010. Sezon claims that Magna carried out transactions for the total amount of 200 million dollars that calculations from documents of clients confirm though some bargains were concluded with orchestra seats of firm. He declared that the main share of securities of the company belongs to it, the rest – to his employees.

Competitors of firm consider that the financiers earning from cheap events usually demand return of 50% of means, according to data of SEC. Sezon claims that the number of the transactions which are unsuccessfully carried out by him can "be counted on fingers". According to the experts, profitability of its transactions exceeds return of means practically of any hedge fund. "Each return of our means is guaranteed", – Sezon considers. – "We do not go into actions and we do not use the strategy which are not making for us profit".

After the successful transaction with Newlead Magna began to provide investments to the most different companies. Sezon organized the "venture" department which made investments in PledgeMusic, started in London the website allowing musicians to sell the albums before their release, and Mainz, one of leaders in the field of outsourcing. Besides, he employed the former director of sound recording studio of the Madonna that that helped it with department of entertainments.

Chad Verdi who began to be engaged in producing of movies since 2011 after financing of the companies with cheap events which did not achieve success in utilization of nuclear waste and detection of chemical warfare agents helped to get to cinema to Sezon. Verdi was a producer of VoD-movies [English Video on Demand] when got acquainted with Sezon. After the Season was engaged in financing of one romantic comedy, Verdi acquainted him with Martin Scorsese at the office which is in theatrical quarter of New York. The famous director told about the documentary under the name "New York Review of Books" which he shot at that time.

"As a result we provided some sum on completion of shootings and became executive producers of this project", – Sezon tells.

Later Verdi suggested Sezon to be engaged in financing of shootings of the movie biography of Winnie Paziyentsa, boxer from Rhode Island which returned to sport after broke a neck in road accident, and decided to win three champion titles. Scorsese acted as the producer of the movie under the name "Bleed Profusely for It" [English Bleed for This]. Besides, the director of the movie "Boiler room" Ben Yanger directed shootings. In "Boiler room" swindles with cheap events are well described, however Yanger declared that he does not see any communication with them.

"We looked for financing sources", – Yanger tells, – "and here Joshua came and rescued us". According to Yanger, Sezon's participation in shootings was not Sezon's idea. "He is a person creative therefore respects work of other artists". Yanger and Verdi declare that the budget of the movie "Bleed Profusely for It" makes 6 million dollars; Sezon considers that it is less, but does not call the exact sum.

The season plans moving of Magna for the Wall Street, 40, in the skyscraper located near the building of the New York stock exchange where he rented two complete floors. He declared that stock trade occupies the one twelfth part of business of the Magna company now.

"Actually I try to create the organization which will exist as early as 1000", – Sezon says. – "I want to create something useful, something important and long-lasting".

This article is a translation of the original post at geektimes.ru/post/250056/
If you have any questions regarding the material covered in the article above, please, contact the original author of the post.
If you have any complaints about this article or you want this article to be deleted, please, drop an email here: sysmagazine.com@gmail.com.

We believe that the knowledge, which is available at the most popular Russian IT blog geektimes.ru, should be accessed by everyone, even though it is poorly translated.
Shared knowledge makes the world better.
Best wishes.