Sure, over the last few years, there were a lot of convoluted and confusing things going on in the world of investments, most of which had acronyms associated with them, like MBS and CDO and whatnot. We – like most people who weren’t in the business of bundling mortgages and slicing them into tranches and selling them off piecemeal – took some time to understand the complexity of those instruments, but eventually were able to suss it out. Go, us! But then, of course, you have guys like the Insane Clown Posse (ICP), who can’t even figure out how magnets work:

If you’re wondering what this has to do with anything, it’s because I just saw a headline that reads “SEC Sues ICP Asset Management Over CDOs”, and my first thought was “Really? Someone trusted their money to these juggalos who think the LAS VEGAS magnet stuck to the front of their fridge is there due to miracles?” –

The Securities and Exchange Commission sued ICP Asset Management and its founder, alleging that they defrauded clients in pooled mortgage products of tens of millions of dollars, including deals that were insured by American International Group Inc.

The SEC sued Thomas Priore, founder of ICP, and alleged that he mismanaged a series of collateralized debt obligations, or pools of mortgages sliced up by risk. The CDOs, totaling $11 billion, were known as the Triaxx series. AIG and Financial Guaranty Insurance Co. provided insurance on the CDOs and had to sign off on any new securities purchases, according to the SEC. The federal government bailed out AIG in September 2008 in part because of souring CDOs that the firm had insured.

The SEC alleges, among other things, that as the credit markets were deteriorating in 2007 and 2008, Mr. Priore caused the Triaxx CDO holders to buy bonds at inflated prices to benefit ICP or another CDO under distress, according to the complaint. The SEC’s complaint describes a series of efforts by Mr. Priore to salvage one CDO facing margin calls by using others to buy securities from the distressed CDO at inflated prices.

With the markets worsening in 2008, the Triaxx fund faced collateral calls and needed to raise cash to meet its obligations. ICP and Mr. Priore caused three other Triaxx CDOs to buy hundreds of millions of dollars in bonds from the fund facing margin calls at above-market prices, according to the SEC. Those CDOs overpaid by $38 million, the complaint says. In another instance, ICP bought bonds in the open market and turned around and sold them to the CDOs they managed at higher prices, bringing the firm profits with risk-free trades, the SEC alleges. ICP and Mr. Priore also bought bonds without the prior approval of AIG or FGIC, as required under their management contract, the SEC alleges.

ICP actually used to stand for “Institutional Credit Partners” in this case. But you have to admit, using one fund to prop up another fund, buying bonds without authorization with money you manage, and skimming profits off the top of deals just because you can are all kind of actions of an insane clown posse, so maybe you can see how I got there.