INTRO: The 2008 financial crisis was devastating, but the
silver lining is that it shed light onto some of the biggest frauds and shortfalls of the industry.
Of course, many of the largest players faced no consequences, but most mid-sized perpetrators
got obliterated. One of these perpetrators was a hedge fund named Absolute Capital Management run
by Florian Homm. Up until 2008, Absolute Capital Management or ACM was one of the fastest growing
hedge funds in the world and Florian was regarded as an investing genius. The fund managed roughly
$3 billion at their peak and they were crushing the S&P 500 year after year. But in late 2007,
Florian could sense that a storm was coming and that his facade was about to crumble.
So, he stuffed $500,000 into his underwear and disappeared off the face of the planet. ACM
subsequently crashed 93% by June of 2008 and the SEC would charge Florian with $200 million worth
of investment fraud. Since then, Florian has been on the FBI’s most wanted list, but to this day,
the FBI hasn’t been able to serve him justice. And it’s not like they don’t know where he is
either. Everyone knows that he’s living in Germany and he even does interviews to this
day claiming his innocence. But despite this, the FBI has been able to do nothing. So, here’s the
story of how Florian Homm stole $200 million and successfully escaped the FBI’s most wanted list.
FLORIAN HOMM:
Taking a look back, Florian was born on October 7, 1959 in a small town near Frankfurt,
Germany called Oberursel. Growing up, Florian had a pretty nice childhood as his father was
a rather successful businessman. Florian’s father had built up a pipe welding and bathroom fittings
installation business that was quite lucrative. Though Florian was grateful for the business,
he had no interest in following his father into the business. To Florian, welding pipes
and installing bathroom fixtures sounded extremely boring. Something that did interest him though was
his great uncle Josef Neckermann. Josef was not only filthy rich, but he was a superstar. Josef
was an equestrian olympic athlete who had won 2 gold medals, 2 silver medals, and 2 bronze medals.
He also won two world championships and 4 European championships. And on top of all this, Josef
started Germany’s largest mail order business at the time and employed 30,000 employees.
So, if Josef were alive today, he would basically be a billionaire olympian. Josef hosted a family
gathering at his mansion every Sunday, and Florian recalls that these visits are what convinced
Florian that he had to be rich just like his great uncle. And with that in mind, Florian would
be sent off to the US where he attended Bentley High School in Michigan. Florian ended up crushing
high school and would be accepted into Harvard university where he got a bachelors and an MBA.
And following his studies, Florian scored a job at the prestigious Merrill Lynch. He worked here
for a couple of years, but he would eventually switch over to Fidelity Investments where he got
the opportunity to work under and be personally trained by Peter Lynch. After leveraging this
phenomenal opportunity, Florian moved back to Germany where he would become a senior vice
president at Julius Bar. I think most of us would agree that Florian was already killing it, but his
ambitions were much larger, so Florian would go ahead and start his first company in 1993.
GOOD TIMES:
Florian’s first company was called Value Management & Research and it was based in
Frankfurt Germany. At first glance, the company is just another run of the mill hedge fund,
but Florian’s charm is what would really attract investors. You see,
Florian had a very peculiar investing philosophy. He believed that the traditional hedge funds were
doing it all wrong with their fancy algorithms and complex mathematics. Florian believed that it was
much better to approach investing holistically. For example, instead of basing your investments
on quarterly reports, with holistic investing, you would base your investments on the impact
and influence of the company. This isn’t exactly a new idea as long term investors often tend to be
more holistic anyway, but for a hedge fund, this was definitely out of the ordinary. Florian chose
a couple of internet and technology hype stocks to invest in, and thanks to the dotcom bubble,
these stocks would explode. Florian became iconic for these investments and these stocks were often
referred to as Homm stocks. Moving past the dotcom bubble, Florian began to spend his new found
fortune. In 2004, for instance, he invested 20 million euros into the German soccer club Borussia
Dortmund. The soccer team was nearly bankrupt and was suffering from terrible management.
So, when Florian invested 20 million and overthrew the old management, he was hailed as a hero
by many soccer fans. Florian would leverage this media attention to start a new hedge fund in 2005,
and that brings us to the infamous Absolute Capital Management. ACM was launched to great
fanfare and given Florian’s popularity, charm, and holistic investment strategy,
investors flooded in. ACM did have quite a few winning picks, but they were all quite odd.
Florian wasn’t investing into Apple or Amazon. One of his most famous investments was actually
a Berlin brothel called Artemis. Such weird choices simply garnered ACM even more attention,
and Alternative Investment News would even name ACM as the hedge fund leader of the year. By 2007,
ACM had grown to $3 billion in assets, and Florian’s personal fortune was worth $700 million.
But it wasn’t all good as Florian’s great wealth also attracted negative attention.
FAILED ASSASSINATION: One day in 2006, as Florian was traveling
through the streets of Caracas, Venezuela, he would be stopped by a group of armed men.
The armed men demanded everything Florian had on him which included his wallet, mobile phone,
and watch. Florian quickly handed over his wallet and phone, but he didn’t want to part
with his watch. When Florian tried negotiating to keep his watch though, the armed men started
shooting. Florian was shot in his chest and ended up losing most of his left lung and his spleen.
But thanks to emergency surgery, Florian was able to survive. While it seems like this was simply a
robbery that went bad, Florian is convinced that this was an assassination attempt, and there
is good reason to believe this. First of all, Florian wasn’t traveling alone, he was traveling
with his bodyguard and driver. Not only did the bodyguard do a poor job at protecting Florian,
but he was shot in a much more non lethal way. The bodyguard was shot in the knee and the driver
wasn’t shot at all. So, it’s possible that the bodyguard and/or driver were working with the
robbers. Something else to consider is that, in most cases, robbers aren’t looking to hurt you.
They simply want your money, and being wanted for homicide is much more risky than being
wanted for a robbery. So, it’s odd that the robbers were so willing to open fire, especially
in a lethal way. Despite the sketchiness of the situation, it was never determined if this
really was a failed assasination attempt or simply idiot robbers. This experience did, however, lead
to Florian reevaluating his life choices. Florian says that he had all the money he could ever need,
but he was wasting his life working 16 hours a day 6 days a week. He could afford all the luxuries he
wanted, but he didn’t have the time to actually enjoy them. So, in September of 2007, Florian
announced that he would be selling his stake in ACM and retiring. This was a bit of a douchebag
move, as his $40 million stock sale crashed the stock 75% from $2 billion to $500 million. Anyway,
after the sale, Florian would spread this money across 120 bank accounts located in 4 different
continents, and he would flee the US. On his flight out of the US, Florian carried $500,000 in
his underwear and his accomplice carried another $700,000. This was no doubt a pretty sketchy
way to leave, but many were still sympathetic towards Florian given his near death experience.
In reality though, Florian had just gotten away with one of the biggest frauds in US history.
THE FACADE:
Despite all of the positive press Florian was receiving, his entire fund was basically a scam.
He was literally operating fraud on top of fraud on top of fraud, and the SEC was catching on.
The first form of fraud Florian was running was the classic penny stock pump and dump. Between
2004 and 2006, Florian had been using his massive cash reserves to buy up low volume penny stocks,
and dump them onto uneducated investors. Aside from running a pump and dump, Florian had a
clever way to make even more money on the side. You see, Florian had set up a secondary company
that was responsible for executing trades for ACM, and this company charged insanely high fees. So,
not only was Florian making money on the pump and dump itself, but he was making money executing
trades for the pump and dumps. Not all of ACM’s investments were in pump and dumps,
but even the non pump and dumps had fraud written all over them. For example, Florian
and his partners would regularly trade stocks amongst themselves to inflate the daily volume of
these stocks and make it seem like these stocks were way more popular than they really were.
ACM also had investments in private companies and given that these shares weren’t traded publicly,
it was ACM’s job to provide their investors with a fair valuation for these private companies.
But as you would guess, the valuations that ACM told their investors were way inflated.
Looking back, there were a bunch of red flags surrounding ACM from the very beginning.
ACM was posting insane growth numbers during a relatively stagnant time following the dotcom
crash. Not to mention, ACM was registered in the Cayman islands. Anyway, the SEC did eventually
catch on and the FBI would file criminal charges against Florian in March of 2013.
But, Florian had already lived a free life for 6 years and he had no intention of changing that.
ESCAPING THE FBI:
Florian wasn’t able to just walk away from the FBI though. Just two days after the FBI filed criminal
charges, they were able to locate Florian in Italy and arrest him. From the very beginning, it seemed
like Florian's plan was to just battle against extradition. His lawyers argued that Florian
suffered from multiple sclerosis and that he couldn’t be extradited due to health concerns. The
FBI played along and fought back against Florian’s lawyers with doctors that testified that Florian’s
condition did not prevent incarceration. It seemed like the FBI was winning as the court would side
with the FBI and agree to extradite Florian which meant up to a 225 year long prison sentence.
While the FBI was celebrating, Florian had a completely different plan to get out.
You see, Italy actually has a rule that once an extradition decision becomes final, the prisoner
must be extradited within 45 days or they’re released from prison. It’s not clear if stalling
was a 200 IQ move from Florian or if it was simply an oversight from the FBI. But either way,
Florian would be released from prison on June 23, 2014. As soon as Florian was released, he bought
a train ticket to Florence where his lawyers picked him up and took him to Germany. Florian
crossed the German border the following day, and this officially marked his freedom. You see,
Germany has a strict policy of not extraditing German citizens, and since the German courts don’t
have any arrest warrants against Florian, Florian is a free man as long as he stays in Germany.
LIFE AS A FREE-ISH MAN:
Florian is still on the FBI’s most wanted list, but the FBI has avoided extraditing
him by force because they don’t want to ruin relations with Germany.
In the meantime, Florian has become a completely different man. He says that his year in Italian
prison completely changed his outlook on life. He’s transparent that what he did at ACM was
completely immoral and unethical, but he still holds that he didn’t break any laws. Florian has
become a strong christian and spends most of his time sharing his knowledge and donating his money.
For example, he published a book called Rogue Financier, and he donated 100% of the profits
to the Liberia Renaissance Foundation. He also co-founded a charity called Our Lady’s Message of
Mercy to the World Foundation. He even has his own YouTube channel where he discusses his thoughts on
the world, the economy, and the stock market on a regular basis. So, Florian has turned into more of
a Wolf of Wall Street type figure as opposed to a Bernie Madoff type figure. Still, some people
argue that Florian should be extradited to the US and jailed for his crimes while others argue that
what Florian is doing now is a much better way to repay society instead of just rotting in jail.
Which camp are you in? Comment that down below. Also, drop a like if you’re glad that Florian
is at least changing his ways. And of course, consider joining our discord community to suggest
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