The japanese version of MF Global....or maybe Bernie Madoff

AIJ likely lost pension funds trading futures

Cayman, H.K. cash trails go cold; 36 of 84 clients ID'd

Kyodo

AIJ Investment Advisors Co. used clients' corporate pension money to conduct futures trading in Japan, after first transferring the money to the Cayman Islands and Hong Kong, sources said.

The details offer clues on how the suspended asset manager allegedly burned through most of what is now believed to be ¥210 billion entrusted to it by 84 employee pension funds covering more than 880,000 people as of the end of 2011.

In a related development Thursday, the Health, Labor and Welfare Ministry published the names of 36 of the 84 corporate pension funds damaged by AIJ after they agreed to be publicly identified.

The others refused on the grounds that disclosure might fuel public "unrest."

Those that lost money include software developer SCSK Corp., Cosmo Oil Co., Nihon Unisys Ltd., Lion Corp., Dai Nippon Printing Co. and Fuji Electric Co.

According to the sources, AIJ officials have told the Securities and Exchange Surveillance Commission it invested most of the money in funds registered in the Cayman Islands, a tax haven. The money was then channeled to Hong Kong before being used for futures trading in Japan.

The Financial Services Agency suspended AIJ for a month last week after the securities watchdog learned that most of the assets entrusted to it were missing.

The SESC, however, has not yet found any financial documents that would shed light on AIJ's operations and help it figure out where the money went.

The company, headed by Kazuhiko Asakawa, was renamed AIJ in 2004. It instructed trust banks to purchase financial instruments for its clients, mostly corporate pension funds. AIJ also used the trust banks to solicit money from its clients.

ITM Securities Co., a company effectively under AIJ's control that is reportedly listed as a distributor of AIJ funds and based in the same building, invested most of the pension bodies' assets in Cayman Island funds at the request of the trust banks.

AIJ also submitted false performance reports to the FSA, while ITM is suspected of having falsely told the trust banks it secured good returns on the investments.

Set up in 1989, AIJ has been touting investment returns that defied the global turmoil triggered by the 2008 financial crisis, industry sources said. As of December, AIJ only had about ¥20 billion in assets under management.