Craig Mellow, at The Deal Magazine has a fascinating profile of Yuri Milner, the Russian investment banker who runs Digital Sky Technologies, a multi-billion dollar fund. Close connections (The Deal Magazine)

Mr Milner has garnered tremendous amounts of publicity for his investments in Facebook, Groupon and other high flying US companies.

These companies aren't public but their shares can be traded on private markets but only by individual investors and employees in the company, and prequalified private investors with a high net worth. These secondary markets have become larger over the past few years because there has been little demand for IPOs and they provide a capital exit for some shareholders.

At the time of Mr Milner's investments in Facebook, there was a lot of sniggering about the high valuation he was prepared to pay and his willingness to do it on lax terms. It was seen as a naive investment decision by an outsider.

But take a look at this extract from the article, it shows how Mr Milner managed to parlay his growing media profile into making markets, then shifting his investments. Seems like a classic "pump and dump" strategy.

The $10 billion valuation Milner put on the social network famously grew to $50 billion by January 2011 when Goldman Sachs Group Inc. bought in with its own innovative structure. Milner's DST, which kept buying bits in the interim, had by then amassed 10% of Facebook for an estimated $800 million, delivering a paper profit over two years of $4.2 billion. By the time Goldman arrived on the scene, Milner had cashed out much of his equity...

He's been using a similar strategy with investments in Groupon and Zynga. The modus operandi seems to be:

- make a big investment in company X, at a high valuation.

- the media picks up on it and gives the story wide play.

- other investors get interested and put money in too, which drives up the valuation of company X.

- then at the right time, take some money off the table, repeat the above steps.

It's no wonder that Mr Milner has the money to buy a $70m home in Silicon Valley.

Mr Milner has also adapted his investment style to tiny startups. Such as investing $150,000, sight unseen, in 43 companies that were selected by Y Combinator.

A major issue with secondary markets is that they are unregulated and the liquidity is far smaller than in public markets. This makes valuations of private companies more volatile because of the actions of one or two large investors. And it is much easier to affect the smaller numbers of investors in private markets through savvy use of the media. This is why the SEC is looking into new regulations for secondary markets.

You can read more on Mr Milner and his background here: Close connections (The Deal Magazine)