Archive for March 28th, 2009

The Rosemont Saga and the local swap market

March 28, 2009

While I thought that the Rosemont story would go away fast, the more that one learns, the more one realizes that this story has legs and will be around for quite a while. Finally the MSM realized that this was not simply that the DEA caught Mr. Vyasulu during a wire transfer via Rosemont to or from an account related to money laundering, but that the DEA set up a sting operation against him and as can be read in the indictment: “involving property represented by a law enforcement officer to be proceeds of specified unlawful activity…”. That is, a DEA agent presented himself to Mr. Vyasulu and told him the funds came from an illegal activity, drug trafficking and he agreed not to reveal the deatils which is obviously against the law. Since these sting operations are not set up at random, I have no doubt that there was a suspicion that justified this and the authorities simply wanted to have a clear cut case before they moved on it.

And while Mr. Vyasulu made the transfer via Rosemont, of which he is a principal, the only action so far has been against him personally and the freezing of Rosemont’sĀ  accounts. But I am sure, there will now be a long process of investigating all of the accounts and looking at all suspicious transfers that originated the sting operation. Whether the suspicions had or not something to do with Rosemont’s business in Venezuela is hard to tell, but we will know more in the next few days, as more announcements are made.

Because Rosemont was definitely acting as something more than a simple money or fund transmittal service which is oriented to small amounts and certainly does not usually have the elements of settling accounts between account holders and the like. Rosemont was being used both as a bank and as a settlement system at the simultaneuously and this is clearly not within the scope of Florida legislation for money transmittal. In fact, Florida legislation states that any funds received have to be transferred out within ten days of receipt, which means that Rosemont had to be very careful to have all account holders remove funds periodically to be in compliance with this. And this money transmittal business was intended by the legislator to be used for smaller amounts, as it required the funds to be held in deposit in sub-accounts at “FDIC protected” institutions. Since up to last summer this protection any extended to US$ 100,000, it is clear that this type of license was not meant to be used for moving the large amounts that have been reported.

But if the El Nacional reporter was able to spot the sting operation, the small headline in the front page is absolutely wrong: “Local dollar swap market continued suspended”. I don’t know where they got this information, but the market was functioning Friday. In fact the reporter could have checked either bonosvenezuela or Venezuelafx and noted that prices were changing and had changedĀ  during the day. Obviously the market was not as active, after all, 40% of the participants had funds in Rosemont, but prices were changing because someone must have been trading something. In fact, the same article quoted other news sources out of context, telling you how far the reporter went in getting the information.

And I am sure by Monday the market will be even more fluid.

And there is no doubt in my mind that this Rosemont Saga will not stop here and we will revisit the topic in the next few days.