Betting the Fund: Slapshots, Subprime, and the Spectacular Fall of Phil Falcone

What happens when a small-town hockey player from Minnesota’s Iron Range swaps his stick for a Bloomberg terminal and $26 billion in other people’s money? You get Phil Falcone—the hedge fund king who shorted subprime to riches, then torched it all, borrowing from his own fund, rigging bond markets, and backing a satellite network that nearly broke GPS nationwide. This is decision deafness in action: how a man who couldn’t hear “no” went from billionaire to pitching crypto TV—with his name misspelled in the deck.

This episode was researched and written by Cherise Lloyd. Some music was created by using UDO. You can find show notes, transcripts, and sources at www.overleveragedoverconfident.com. Follow us on Instagram at Overleveraged Overconfident. Support the show on Patreon and help us keep deep-diving into those spectacular financial fails.. Overleveraged Overconfident is part of Seven Seven Spider, which specializes in deep dive research and financial storytelling. All research uses publicly available sources, so no confidential or regulatory information, just my keen sense of spotting nonsense.

Transcript

Cherise 2: 0:00

When you make it big, you should go big, buy something with some history or just something owned by an adult magazine founder.

Arlene Herson: 0:07

Hello, I'm Arlene Hurston. Did you ever fantasize about living in a palace? Well, this is about as close to a palace as any home I've ever been in. 28,000 square feet, 42 rooms, nine levels. Indoor swimming pool, imported marble, solid gold bathtub. This is just one of Bob Gucci's fantasies that have come true. He lives here with his wife and partner, Kathy Keaton, the empire they have built together side by side, which includes Penthouse and Omni Magazine, is run right here from this beautiful townhouse. They've invited us in and are going to give us a tour, so come along with us and fantasize.

Cherise Lloyd: 0:48

Let's talk about the second owner of that house. I think Matt Levine put it well in the online blog deal breaker. If you know nothing about Phil Falcone, but what you read in the SEC's assortment of complaints against him in 2012, you would probably conclude that he's kind of a dick. While Matt Levine moved on to Bloomberg opinion page, it seems that Falcon has stayed the same. If you're not a New Yorker or into speculative investing, you may not recognize the name. Phil Falcone, the founder of Harbinger Capital. He made a fortune betting against the housing market and spent the next few years losing it and making enemies out of just about everyone. Regulators, investors, rivals, even other billionaires. If there was a line across, he crossed it. If there was a rule, he tested it. And if there was a way to make money while screwing over Wall Street and calling it strategy, Falcon would try to find it. He was always someone who went all in. If you read the New York Post, the Glad Rag of Manhattan, you may be aware of Phil as one half of the power couple, with his wife Lisa Maria, did everything possible to crack High Society as New York Magazine puts it short of grabbing the sun and physically shining it on themselves. This is the story of Phil Falcone. Rich, reckless, and maybe just a little too confident for his own good. Welcome to Over Leveraged Overconfident, the podcast where spectacular risk meets even more spectacular ego. The hedge fund tightens FinTech darlings and CDO Cowboys who swagger into risks like they own the term sheet only to end up with subpoenas, sell offs and sob stories. Hi, I am Cherise and I've spent the last 15 years in the front row seat to the financial meltdowns from the Federal Reserve to the Optimistic leverage finance. And I've seen smart people do very dumb things with large sums of money. This is where we will look at investors who talk their book and when conviction replaces confirmation. Since the risk of failure may seem extremely unlikely, even if it's highly reoccurring, I love research, but it's rare to have the depth of information on Phil Falcone and his wife, Lisa Maria. They have been profiled several times in Vanity Fair. W Magazine, CNBC and Bloomberg News. And occasionally on the red carpet for a Lisa Maria produced movie, like The One about leukemia starring Mariah Carey. Along with the other roles of budding novelist, music producer, and model. Phil is regularly in the press. Either as the CEO of Harbinger Capital or its current incarnation HC two. He's either suing a creditor or being sued by one, but we should start from the top. Phil Falcone entered the world on Bastille Day, 1962 in Chisholm, Minnesota, a town of 5,000 and part of the world known as the Iron Range. In fact, his grandfather was an iron ore miner for four decades before retiring. Philip was the youngest of nine with his mother Caroline, earning 80 cents an hour stitching t-shirts. And his father Henry, capping out at 14 k annually as the local utility superintendent. Things took even a darker turn when Henry was indicted for creative municipal accounting. Having city workers renovate the mayor's cabin on taxpayer's dime. Henry Falcon decided he needed a fresh start, a new town, a new state, and he moved to Iowa. Phil was six. Carol Falcone at 47 had little interest in starting over with nine kids and remained in the three bedroom house in Chisholm. Like many dealing with home troubles, Phil found his escape route. He turned to sports, and this being only two hours away from Canada, hockey was a natural choice. He spent hours at the rink working out whatever complicated feelings come with having your father skip town putting tape on the door jams of the hockey rink, he would slip in after hours, circling the rink, taking shots and mimicking crowd noises. He earned the name The Phantom for his ability to skate untouched, and despite his dominating eye skills, he remained a quiet introvert. The kid had genuine talent and a terrific work ethic. In 1979, he led Chisholm Highs blue streaks on a 12 game winning streak that had College Scouts actually paying attention to a kid from the Iron country. He was recruited by Harvard hitching a ride from a friend with his feet on the dashboard because there was a skate sharpening machine on the floor of the front seat Halfway there, the disintegrating roof liner rained fiberglass, which stuck to both boys in the August heat. It was a very long drive. At Harvard Falcon played center on the varsity team. And earned a reputation as the guy who could outwork anyone. Though he later admitted he was too distracted to reach his full potential on the ice, he graduated with an economics degree, but instead of heading straight to Wall Street, like most Harvard econ grads, Falcon took his talents to Sweden chasing the hockey dream in Europe's minor leagues. The adventure lasted until 1985 when a leg injury finally forced him to hang up the skates and face reality. It was time to find out what that Harvard degree could really do. Falcone's competitive instincts found their new arena in 1985 at Kidder Peabody, and company trading junk bonds. As he'd later tell the Harvard Crimson, it was perfect casting. He didn't have the patience for investment banks as kissing apprenticeship program. Junk bonds offered immediate action and the kind of real time feedback that appealed to someone who spent years reading ice conditions and in face-offs where a puck is dropped between two opposing players to restart the play. Besides his comfort with face-to-face confrontation, two other things would survive his transition from hockey to Wall Street. His signature shoulder Length hair parted down the middle, which in coming years he would play with during interviews and next his suspicions. Though he had upgraded from re-wearing the same game shirt for weeks at a time, to the more socially acceptable pendant of Ganesh, the Hindu remover of obstacles. Sadly, for Falcon, his first real investment, Ganesh must have been off duty. In 1990, despite having zero experience running anything, Falcon and a friend decided to buy AAB manufacturing, a troubled hairbrush company. A year later, a a b defaulted on its debts, and Falcon lost everything. His savings, the company, and even basic utilities became unaffordable luxuries. Exactly one year after his financial Wipeout Falcon would meet Lisa Maria Vasquez. A former model from Spanish Harlem and what has been described as both a friendly setup or something as transactional as a girl model, boy financier, mixer. They started dating when he had nothing to offer except potential and whatever charm comes from complete ruin. By 1995, Falcon was back trading junk bonds at First Union, older and wiser about the difference between opportunity and wishful thinking. He moved to Gleacher Net West in 1997, the same year he married Lisa Maria. Officially upgrading from air mattress to altar, and then Barclays. In 1998 at Barclays Falcon developed the insight that would define his career. While everyone else used bond shorts as defensive hedges, Falcon saw pure offensive potential. The math was elegant. Stocks could theoretically rocket to fin making shorts infinitely dangerous, but bonds rarely traded above par value. That built-in ceiling meant a knowable limit on the losses with unlimited profit potential all the way down. Like discovering a casino game where the house edge actually works in your favor. Falcon spent years perfecting his bond shorting strategy, pitching it to anyone with serious capital. The breakthrough came in 2001 when Birmingham based. Harbert Management bit backing him with 25 million to launch the HAR Distressed Investment Master Fund. A polite name for what essentially was venture capitalism perfect for a man who wasn't afraid to shove someone into the boards to get a point across. Distressed investing is capitalism's cleanup crew. Circle dying companies extract whatever value remains and somehow convince everyone. It's a public service. It requires analytical certainty and some detachment. Sometimes you're late to the carcass. the early Harbert years were golden. Raymond Harbert himself would later describe 85 to 90% of the experience is positive. Particularly praising Falcone's command of detail when betting against subprime securities from 2001 to 2005, it was fantastic. Something in that assessment suggested the remaining years were considerably less fantastic. And in 2007, Falcone, life changed.

Phil Falcone: 11:05

I think I started looking at it in January of 2006 and didn't make the first investment until November of 2006, but by February of 2007, I had 8 billion in position. Oh, so I. Ramped it up pretty quickly. 8 billion. You're right. You have a great stomach for risk. Yeah, there was a lot of volatility and then we went, we increased the size over and above that. The difficult part is explaining to investors why I did this and I'm not a great communicator.

Cherise Lloyd: 11:35

His number one venture play was against subprime mortgages, and his fund made 11 billion betting on a subprime market collapse, which netted him personally over a billion dollars. He went from me, millionaire to billionaire. Suddenly he was listed among America's wealthiest. He celebrated by buying the Penthouse magazines. Bob Gucci owns 28,000 square foot Manhattan Mansion for 49 million now. Even his pet pig Wilbur had a room, certainly a step up from the bunk bed situation Falcon grew up in. He bought a piece in a hockey team, an art collection, a Chateau in France, a house in St. Bart's, and his wife. A haute couture wardrobe she could wear to play soccer in Central Park with their twin daughters. The couple also turned up the wattage on their New York image. The Manhattan money set nearly choked on their champagne. When Lisa Maria clearly operating from some brilliant cocktail of confidence and calculated chaos. Marched straight up to the podium, grabbed the mic from the gala presenter, and announced a matching$10 million pledge to the Highline. Effectively hijacking the evening's, carefully choreographed donor theater, and up staging power couple. Barry Diller and Diane von Furstenberg. He joined John Paulson

13:07

and

Cherise Lloyd: 13:07

Michael Burry who all cashed out in millions on the subprime blowup and just like that. And just like them. He struggled to find another win. But those crucial early years, Falcon had finally found his element not on ice. But in the brutal marketplace where his particular combination of intelligence, intuition, and ruthless confidence would flourish.

Phil Falcone: 13:34

I think a lot of my competitive instincts and my competitive spirit is because of hockey. I was a pretty decent player and managed to, uh, kind of take leaps in my life because of it.

Cherise Lloyd: 13:48

To understand how the downfall started, you need to grasp that Falcon is at his core, a hockey player. You hit him and he will hit you back so hard as to make your teeth rattle. Falcon was still operating on ice rink rules. You checked me into the boards. I'm dropping at gloves and going for blood. When Raymond Harbert, the CEO of Harbert management hired Falcon to manage his fund. He wasn't prepared for this side of Falcon or his$2 billion temper tantrum. Let me set the scene. It's 2006 before his subprime slap shot. Phil Falcon is sitting on a massive pile of bonds from a company called Maax Holdings. Specifically they're junk bonds known on Wall Street as Maax Zips. These things were trading at bargain bin prices well, because no one had any faith in the company's future. That's exactly the kind of setup Falcone lived for, swooping in when everyone else was running away. Phil starts buying a lot. He scoops up$108 million worth of these bonds. About two third of everything, Maax had it ever issued. At this point, he's not just an investor, he's the market. But then Phil hears a rumor and it pisses him off. Apparently one of his own brokers, uh, let's say it rhymed with Goldman Sachs, was shorting the very bonds he was buying and encouraging their customers to follow along Translation. They were betting the bonds with drop in value. Worse, they might even be using Falcone's own bonds to cover their shorts effectively killing his investment. This is not some conspiracy theory. Goldman Sachs had a longstanding reputation. Fair or not for putting its own interests ahead of its clients. Critics accused the firm of trade against its customers offering products with one hand while quietly betting against them with the other. There is actually an entire book written on this to Phil. It wasn't just bad business, it was betrayal. And what did he do? He went full scorched earth. Phil decided to put those short sellers in a choke hold and not just any choke hold. An old school Minnesota hockey enforcer style chokehold Falcon grew up playing hockey in a Minnesota mining town where winter lasts 11 months and subtlety is considered a character flaw. If someone tried to skate past him, he wasn't gonna just trip them, he was gonna slam them into the boards and demand. They say thank you. It's called competitive spirit, and this is what got him into Harvard. He ordered his fund to keep buying the Maax bonds every last one they could find. By the fall, they had accumulated more bonds that exist on paper. Literally, the fund owned about$174 million worth of Maax zips in$170 million issue. You might ask, how is that possible? The bond market is weird like that. Just know that it's legal, barely, and it's deeply aggressive. But Falcon wasn't done. He locked those bonds away, moved them into a custodial account in Georgia, not because they needed the Southern hospitality, but because once they were in that account, no one else, not even his own broker could borrow them to cover their short positions. It's like hoarding every roll of toilet paper in town and then asking your enemy if they wanna buy one for a hundred dollars. And when the short sellers started to panic because there was no way for them to close their bets, Falcon leaned in. He told them to start bidding hard. He offered to sell them some bonds back, but only at Sky high prices. And when they declined, he tightened the screws. He kept buying, he kept hoarding, and then just to mess with them even more on Christmas Eve, no less. He quietly sold a junk of the bonds to a random offshore account for 1 cent on the dollar, not to make money, not to even make a point just to fudge the numbers so it wouldn't look like he owed more than a hundred percent of the supply. And guess what? He didn't report the sale to the system that tracks trades. It stayed hidden. The trap stayed set and the short stayed cornered. This wasn't investing. This was a vendetta and Goldman flagged it to the SEC, which did not find it charming. The SEC called this an illegal short squeeze, which in regulatory speak for financial terrorism, disguised as market strategy. Falcon and his team had essentially cornered the market on bathtub bonds outta spite, and then held everyone hostage while demanding ransom payments. It was impossible for anyone to settle their trades without going through him at his price on his terms. Falcone's defense, sometimes you're just on the wrong side of the trade. The SEC wasn't amused and they sued. They wanted fines, a ban from running any public company and a promise that he would never pull a stunt like this Again, the government's position was refreshingly straightforward. You can't own more than a hundred percent of something, hide the inconvenient truth from everyone else, and then charge monopoly prices while pretending. Scarcity is natural. Market forces. It is like buying every decent apartment in Manhattan, keeping them empty, and then claiming the rental shortage is just supply and demand. For Falcon, this wasn't a scandal. This was a power play. To him, it was simple. If Wall Street was going to screw him, he'd beat them at their own game and then make them pay to leave the table. By the time the Securities and Exchange Commission filed the Maax complaint in 2012, it was also upset with Falcon due to a trick he pulled a few years earlier. He already made another headline worthy move, borrowing 113 million from his own fund while blocking his investors from touching theirs. Before cornering a minuscule piece of the bond market and daring Wall Street to fight him. Phil Falcone had made another bold move but this time it wasn't about the market, it was about his taxes.

Bloomberg Anchor 3: 20:45

Phil Falcone's Harbinger Capital is being investigated by the SEC and also the US Attorney's Office. They're examining a$113 million loan that Harbinger gave Falcon last year to help pay for personal taxes. This is according to two people familiar with the investigation. Falcon said the loan was documented and audited by the firm's outside advisors.

Cherise Lloyd: 21:08

There's one concept we need to understand before we get into the real juicy parts of this downfall. It's called gating, and if you've never heard of it, buckle up because this is where hedge funds reveal their true nature. Picture this scenario. You're at an exclusive nightclub and suddenly everyone decides they want to leave at exactly the same time. The bouncer at the door isn't going to let 300 people stampede through a single exit. That's how people get trampled. So instead he controls the flow. Sorry, folks. 10 people at a time. Wait your turn. That's essentially what a fund gate does, except instead of Partygoers, we're talking about investors trying to get their money back and instead of avoiding a stampede, we're trying to prevent what is euphemistically called a liquidity event, which is Wall Street speak for holy shit. Everyone wants their money back. Right now. In 2009, the world was licking its wounds from the financial crisis. Hedge funds were gating investors, meaning no withdrawals were allowed. The argument goes like this, if anyone tries to withdraw their money simultaneously, the fund will be forced to sell its assets at terrible prices just to raise cash. This hurts everyone, including the people who wanna stay invested. Falcone's Fund was one of them. In his case, it implemented what they called a lockup due to quote possible claims arising from the bankruptcy of its prime broker translation. Their prime broker, Lehman Brothers had gone under creating legal complications that made it impossible to return investor money quickly. Whether this is a legitimate legal caution or convenient excuse, depends entirely how charitable you're feeling towards Phil Falcon, which at this point in our story should be not very charitable at all. Most of the investors were stuck. No money in. No money out except for one person, Phil Falcone. See, Phil had a problem, a big one. The IRS sent him a tax bill that would've made most of us pass out over a hundred million dollars and he needed to pay fast. Now, you think that a billionaire with a Manhattan townhouse, an art collection and a stake in an NHL team would go the normal route, sell something. Borrow against an asset or maybe just refinance, but Phil didn't do normal. Most hedge fund managers stay inside the lines. Falcon tore the boards off the rink, hijacked the Zamboni, and skated over anyone who tried to stop him. He dipped into his own hedge fund and took the money. 113.2 million to be exact. He borrowed from a fund where outside investors were locked out and borrowed from, redeeming their money for over a year. And his lawyers, they literally said, don't do this. Counsel warned that the loan would be a terrible idea. Inappropriate not in the fund's interest. Absolutely not. Standard practice. Now, what did Falcon say when shown these warnings? Okay, that's it. Okay. He shrugged and then shopped around and finally found new legal counsel and without any due diligence or any indication they had reviewed the interest of the investors. Poof, they approved it. Now this is where it gets even more ridiculous. He borrowed the money at 3.66% a rate so low. It was cheaper than what the fund itself was paying to borrow the cash at the time. Translation, he got a better deal from his own fund than his fund could get out on the open market, and he didn't get investor approval. He never set up the required investor committee to review the related party transactions, even though the funds documents called for one, and he hid the loan from investors for five months. When the truth finally started leaking out. Falcon tried to smooth it over. He told investors the loan had been thoroughly vetted by a top law firm. It hadn't, he said it would've been backed by all of his holdings about 14 times the loan's value. It wasn't, turns out it was backed just by his interest in the fund itself, so the collateral wasn't 14 times, it was an even two. And if you're wondering how investors reacted, well, let's just say 80% of them had already filed to pull out their money before this news broke. After the loan, the gates just stayed shut. Redemption requests pile up. And worse, harbinger had cut secret deals offering better terms to bigger clients while everyone else sat in the dark. All of it added up to one undeniable truth. Falcon wasn't just mismanaging money. He was prioritizing himself over everyone else and pretending this was normal. The SEC's verdict, a glaring conflict of interest, misleading disclosures, a lack of basic governance, and a deliberate attempt to benefit himself at the expense of everyone else. Phil Falcon wasn't just running the piggy bank. He built the bank, barred the door, and then loaned himself the keys. Falcon and Harbinger eventually settled for both the Maax Bond deal and the weird personal loan. Harbinger's Chief operating Officer, who had been with the firm for less than a year, was barred from the securities business and banned from working as an accountant. They didn't just write a check and walk away. They admitted to the facts and gave up the right to challenge it. Falcon and his fund were hit with over 18 million in fines and repayments. He was permanently barred from serving as a director or officer of any public company, and just to make sure that there were no more creative ideas. The court slapped an independent monitor to oversee Harbinger's operations for two years. The loan, the tax bailout, the coverup, the fake collateral, the sweetheart interest rate, the preferred redemptions, it all became the second pillar of their lawsuit. Now, remember how Falcon said the loan was the only option? Well, it turns out that wasn't true either, but when your motto is go all in on red, looking for other options might feel like a weakness

CCTV Anchor: 28:01

Wall Street regulators have extracted their first admission of wrongdoing under a landmark settlement. The head of Harbinger Capital Partners billionaire Phil Falcon, admitted he engaged in serious misconduct and wronged his investors. US regulators have now barred Falcon from the financial industry for at least five years, and have also ordered him to pay over$18 million as part of a settlement.

Cherise 2: 28:25

Even before the Financial Crisis, Phil investors were ready for a change, because, well, Phil had changed.

Cherise Lloyd: 28:32

After betting a billion dollars against the housing market, Phil Falcon wanted a legacy, something cleaner, respectable, he wanted to be a TechCom mogul. Falcone's Next move was as bold as yet to take on AT&T Verizon and the entire United States wireless industry using satellites. The old investors had no interest in watching him literally shoot their money into space, and the new ones felt it was too risky. So he pivoted. His fund had a 4G broadband network called Lightsquared built on a chunk of spectrum, originally met for satellite phones. He would repurpose that spectrum. Roll out a nationwide ground-based system, bringing wireless service to every corner of America. It was risky, it was visionary, it was massive. Falcon committed to over$4 billion to light squared, about 40% of his hedge funds total assets. Investors already uneasy after the Maax squeeze and that.$113 million tax loan warn exactly. Excited to fund Phil's broadband dreams. Light squared had promise and initial support from the FCC. In 2011, the agency granted a temporary waiver letting Falcon convert the satellite spectrum into terrestrial broadband network. It looked like momentum, but almost immediately everything started breaking down that spectrum. It was dangerously closed to the one used by GPS Systems, not just your car. NAV system, aviation, defense, search and rescue. Testing revealed the massive interference. Imagine firing up a chainsaw in the middle of a library to GPS systems making them useless, and no one not Pilots trying to land planes, not farmers planting crops, not your Uber driver was going to get anything done. It wasn't just interference, it was technological chaos with a million dollar price tag. And he thought he could muscle his way through the red tape like he had on Wall Street, but this was in Goldman Sachs. This was Global Positioning Systems did Falcon back down, of course not. He blamed the GPS manufacturers claiming that they should have designed better receivers.

Bloomberg Anchor 3: 31:04

Billionaire hedge fund manager Phil Falcone. Falcon is trying to keep government regulators from killing his planned nationwide wireless network and his Washington lobbying budget almost tripled in the first three months of this year. Falcone's Company Light Square had spent a million dollars on lobbyists in the first quarter. That's compared with$350,000 a year ago. Among Falcone's lobbyists, former House Majority Leader, Richard Gehart, and former Democratic National Committee Chairman. Ed Rendell, who also used to be the governor of Pennsylvania.

Cherise Lloyd: 31:37

He said it wasn't his spectrum causing the problem. It was their crappy engineering. Meanwhile, the GPS industry mobilized like war lobbyists, swarmed, Capitol Hill, the military objected, aviation experts panicked. Senator Chuck Grassley. He started asking pointed questions because his state, Iowa had farmers using GPS guided tractors from companies like John Deere the message was clear. This wasn't just business, this was infrastructure. This was national security, and yet Falcon kept going. Investors were sweating. The FCC was backpedaling and Phil, he just kept pressing forward

Bloomberg Anchor 3: 32:19

Slide squared. And that is the issue, trying to salvage this gigantic bet he's made.

bloomberg Anchor 2: 32:24

I, in, in many ways, Phil Falcon has tried to paint himself like the victim. Here, I'm just a businessman, you know, trying to build a business. But you know, and he's calling the government the bullies. But time, and again, Phil Falcon himself has been described as a bully, and the type of active in investing he does is described as bullying. He said, I'm not afraid to put this company into bankruptcy. I'll maintain control. Even that sentiment. If you put the firm into bankruptcy, you lose control. If you made

Bloomberg Anchor 3: 32:50

this trade though, you wouldn't be about to roll over, right? And let the government make these arguments about GPS. At the very least. I mean, those investors left in Harbinger should be wanting Phil Falcon to make as many last ditch efforts as he can to save the business. Its prospect I, whatever the last ditch efforts, the CEO of light squared has already stepped down and the company's cutting 45% of its staff. That tells you plenty. It's another saga. We will continue to follow that of Phil Falcon and his big bet on wireless

Cherise Lloyd: 33:22

in February 20th, 2012, after months of news articles and lobbyist dollars, feeling the heat. the FCC finally yanked Lighsquared's temporary approval. No more wiggle room. No more lobbying. Game over. Three months later, light squared filed for Chapter 11 bankruptcy. Billions Lost, Harbinger devastated. Investors were just plainly done, but Falcon knew he was right and he was going to show everyone. He wasn't just lucky. He was good and they couldn't screw with him. He refused to walk away from the spectrum. He filed lawsuits. He accused Dish network's. Charlie Ergen of secretly buying light squared's debt through a shell company to steal the spectrum himself, like a vulture investor. I wonder if Falcon saw any of the irony there, but probably not. Falcon sued for 2 billion, Claiming the Dish Network's goal was to destroy Lightsquared as a competitor. By this point, most people will be packing it in Falcone. He was convinced the next shift would be his comeback. Light square's failure wasn't just a financial blow, it was a reputational one. The fallout was brutal. Investor sued, confidence vanished, and Phil Falcone. Once worth 1.1 billion fell off the Forbes billionaire list in 2013. By this point, the financial world would've simply grown tired of him.

34:57

The risk factor, does this mean for the rest of the street? Well, I mean, right now what it, what it basically says is that there's this idea that, you know, hedge funds if you are operating in a, in a certain parameter, if you will, some people may key on that as a reason to leave. And Goldman Sachs here possibly looking at this, you know, just the illiquidity of what's happening here. And in terms of. Just the overall returns, guys, it really is. Financial markets more than any other markets out there basically are all about bottom lines, right? And, and the bottom line is a lot of these funds are not making money. In fact, they're losing money when the s and p is up, you know, five, six, 7% for the year to date and possibly, you know, down 15% through the middle of October for one of these funds here at the flagship. Fund. So another reason why, in terms, in terms of what's happening here. Phil Falcon, his wife, Lisa Falcon, of course, we, we did a, a, a report on her. Remember Everest Entertainment? Yeah. A budding Hollywood entrepreneur, producer type person. A lot of these names so associated with kinda like the money that floats around here with hedge funds. This is a reason why for a lot of investors, this could be a, something to kind of really pay attention to.

Cherise Lloyd: 35:58

Falcon burned through his second and third chances, and frankly, he seemed to be completely skated out When markets are roaring and money is flowing, there's absolutely no reason to hand your cash to someone whose brilliant investment strategy includes casino hotels in Vietnam, a country where people famously don't drink, avoid sitting in the sun, and where gambling is largely illegal. He wasn't the comeback kid anymore. He was the guy who borrowed from his own fund cornered the bond market, jammed GPS signals and tried to build an empire on interference, both literally and financially. When you're not just over-leverage, but also overconfident, your track record reads like a masterclass and spectacular self-destruction. And even the most risk hungry investors start looking elsewhere for their thrills today. More than a decade after that infamous tax loan from his own fund that sent investors fleeing and landed him an SEC Hot water Falcone reportedly still pulls up the screen grab of the one law firm's flawed opinion confirming he did nothing technically wrong. However, when the Wall Street Journal features you under the headline how to lose 10 billion in 10 years, your prospects for attracting new funding becomes somewhat challenging

bloomberg Anchor 2: 37:27

This is the same lender Michael Jackson turned to right when he was in financial trouble.

Bloomberg Anchor 3: 37:31

Yeah, absolutely. Regulatory filing show that Fortress, which provides credit in situations where most banks would not ease the same lender that gave Michael Jackson a mortgage on his Never Land Ranch back when he was close to bankruptcy. Now. Fortress is declining to give details on the loan to Phil Falcone. He is the 50-year-old hedge funder, suffering a reversal of fortune after making close to 11 billion in 2007 by betting on the subprime mortgage collapse records also show that within the past year, the couple pledged both their Manhattan Town homes as collateral for about 25 million of personal loans and Falcone's Socialite wife. Also a movie producer is seen as the co-signer in all of these transactions according to the filings. Notably, it was just a year after they made their fortune that the Falcon Falcons paid 49 million for the 27 room mansion, formerly owned by Bob Guccione Uh, dear Dry, have been in that home. It also has a swimming pool, or did on the first floor, quite a property,

Cherise 2: 38:31

Their

Bloomberg Anchor 3: 38:32

Lifestyle required liquidation. The Manhattan penthouse was gone The St. Bart's retreat sold art collection, auctioned to settle tax liens, court judgements, attorneys fees, employment wages, and yes, even limousine fares Yet somehow he managed to maintain that high maintenance lifestyle just a little bit longer. The Hamptons house finally sold in 2024 for 14 million in cash down from its original 28 million asking price in 2021. Thanks to deferred maintenance, demanding immediate attention. So where is he now? Well, starting in 2022. If you work in finance, but your funding has evaporated, you have exactly two choices. Flee to Florida or pivot to crypto. Apparently Falcon still loves New York. He's currently shopping around for investors in his all crypto television platform.

Phil Falcone: 39:34

I, I appreciate it and thank you all for joining us today to hear our story. Um, a little bit of background. I am, uh, Philip Falcone. I am the founder and one of the creators of, uh, this platform. And, uh, I've had a, uh, history of being an investor and both telecom media as well as a number of other areas in the, um, in the marketplace for the last, uh, 20, 25, 30 years.

arthus Bavelas: 40:01

Thanks guys. Phil, um, maybe we can start out by, uh, chatting a little bit about what, how this came about and what is it that you're trying to accomplish? I think that many people feel, you know, there's a lot of people in the family office insights community that have been in the crypto or blockchain business from the onset. Some, uh, a little bit difficult to put your head around. What was, what's the impetus in, in your design for blockchain tv?

Phil Falcone: 40:26

Well, there's really two aspects to this. I mean, one is the platform in and of itself from a decentralization perspective, and I'll get a little bit more into that, um, a bit later. But there's the platform and then there's the information that, uh, will be delivered in uploaded to the platform. And this platform is really designed to, um, democratize the entire process of how people are viewed.

Cherise Lloyd: 40:53

The pitch deck. According to reports, has his own name misspelled. It seems that even his analysts and spell check have given up on him. When you're not just over leveraged, but also overconfident and your track record reads like a masterclass and spectacular self-destruction, even the most risk hungry investors start looking elsewhere for their thrills. So just remember you could take the player off the ice, but sometimes the ice never leaves the player. Thank you for listening to Over Leveraged Overconfident. If you enjoyed this episode, please subscribe and leave us a rating on Apple Podcasts, Spotify, Google, Amazon Music, or wherever you get your podcasts. This episode was researched and written by Cherise Lloyd. Music was created by using UDO. You can find show notes, transcripts and sources@overleveragedoverconfident.com. Follow us on Instagram at over leveraged overconfident. Support the show on Patreon and help us keep deep diving into those spectacular financial fails. Speaking, which if you have a favorite corporate disaster you'd like to hear about, reach out and connect with us@sevensevenspider.com. Over leveraged overconfident is part of the Seven seven Spider specializing in deep dive research and financial storytelling. All research uses publicly available sources, so no confidential or regulatory information, just my keen sense of spotting nonsense. Until next time as we continue tracking the inevitable journey from hubris to bankruptcy.