Japan's Largest Private Equity Firm? The Mob

There is an interesting article in the Time Online (London). Apparently, Japan's powerful yakuza organized crime syndicates are moving away from old-fashion crimes of drugs and prostitution and are increasingly launching an assault on Japan's financial markets. Studies estimate that there are already hundreds of listed companies that may have some mob connections. Using "front companies," organization have become active traders in listed Japanese shares and in some cases own large positions.

Of interest in the article is the feeling that "the new activities of the nation's largest crime syndicates have effectively turned the mob into the biggest private equity firm in Japan." Things have gotten so bad that some observers believe that the problem may have gotten to the point where it is now beyond control. The problem continues to grow exponentially as the groups hire newly unemployed traders who have been laid-off as a result of the credit crunch. In fact, the current mixture between legitimate and illegal activities is making it nearly impossible to discern the difference between the funds that flow through the Japanese markets. Some organizations even operate their own stock trading floors.

All of this reminds me of the attributed quote by the famous bank robber Willie Sutton, although the story may be an urban legend. As the story goes, Sutton was asked by a reporter why he robbed banks. Sutton is quoted as replying: "Because that is where the money is." It should really be no surprise that criminals will search out the financial markets for profit. After all, that is where the money is.

Disclosure: None

 

Comments

[johnhaskell:]

if the yakuza are getting out of drugs and prostitution to become day traders, the profit margins in drugs and prostitution must have fallen to near zero.

BTW I am wondering what is the competitive advantage for a trader moving over to a yakuza controlled firm. Do such firms have better pension plans or benefits than "legitimate" firms? If you make a mistake writing up a ticket do they cut off your pinkie? Presumably Japanese headhunting firms (now that's an interesting pun) would have the answers.

2008 Aug 29 12:37 PM

[Old Trader:]

johnhaskel,

LOL @ "headhunting firms". I'm guessing drugs and prostitution are as profitable as they've been, historically, but the thought comes to mind that financial speculation might provide some good opportunities to "launder" such profits.

Just sayin'

2008 Aug 29 07:03 PM

[Steven Towns:]

It wouldn't be the first time 893 is playing the market. Also have the sokaiya facet although seemingly to a lesser extent.

2008 Aug 30 09:46 AM