Hennessee Group Fined on Bayou Hedge Fund Due Diligence Failures
Hedge Funds Increasingly Turning to Investigators for Due Diligence Assistance
, a New York-based investment adviser is facing a $800,000 fine from the SEC due to the firm's failure to perform promised due diligence of the Bayou Group hedge fund, once run by eventual death-faking, scooter-riding fugitive from justice, Sam Israel
Bayou, of course, was one of the biggest hedge fund flame-outs of all time
, with many of the fund's major players doing jail time
. The SEC complaint details about 40 Hennessee clients who altogether has about $56 million invested inthe Bayou fund.
Hennssee head, Charles Gradante has neither confirmed or denied wrongdoing in the matter. While he hasn't commented on the specifics of his own case, Gradante has submitted a letter to the SEC with a variety of recommendations for how other migh avoid Hennessee's fate.
Amongst Gradante's recommendations - increased reguation of hedge fund borrowing and requiring that third parties, such has Kroll, be hired to conductforencic audits of hedge fund financial statements. More here, via Bloomberg.
Labels: Bayou Group, Fraud, hedge fund, Hennessee, Kroll, Sam Israel
Good stuff, here, from Bloomberg.
Madoff Mess Brings New Hedge Fund Disclosures
Taking the obligatory stroll through Madoff country, they've put together a decent piece on how hedge fundies are using investigators to avoid being the next ones burned.
Investment firms using P.I.s is certainly nothing new, but one might imagine that recent headlines combined with a reenvigorated regulatory apparatus have heated up the market a bit.
Look for comments from Randy Shain of Backtrack/First Advantage Corp.
as well as Pete Turecek of Kroll
And a word of thanks to the friendly tipster who pointed me toward the article.
Labels: Backtrack, due diligence, First Advantage, hedge fund, Jules Kroll, Pete Turecek, Randy Shain
Mark Dreier Does Not Pass Go
Bayou Hedge Fund Swindler Gets Note From Doctor, Goes to Medical Prison
So now we're taking sort of dingy gray boxes
verses black ones.
Labels: Bernie Madoff, hedge fund
They've Always Got to Stick it to The Hedge Funds
Sam Israel Forced to Give Up His Scooter
More Charges for Bear Stearns Managers?
Hedge Funds Once Again Looking Like Greener Pastures for Investment Bankers
I know I am a little late posting this, but the past week has been all election all the time, so I apologize for my tardiness. If you have yet to read about the latest turn in the twisted tale of fraudster (and former dead guy), Sam Israel you can do so right here
Labels: Bayou Group, hedge fund, Sam Israel
SEC's Subpoenas on Rumor Mongering Investigation Spur Wall Street to (Reluctant) Action
Yes, yes... Scandal is just around the corner, returns are down
and portfolio allocations are slowing
. Hedge funds may even be the root of all evil
. But given the dismal state of banking these days, hedge funds are looking like a mighty good place to be for many of Wall Street's finest.
Top talent is making the move to alternative assest, with major jumps
like GLG's pick up of former Goldman Sachs' top trader, Driss Ben-Brahim. GLG also snagged Karim Abdel-Motaal and Bart Turtelboom, former co-global emerging market chiefs for Morgan Stanley.
Labels: GLG, hedge fund, hiring
With 50+ requests pending
BAWAG Trial Sees Nine Sentenced on Charges Stemming from Billions in REFCO-Related Losses
, that's a lot of documentation to scare up and square up. Everyone from Goldman Sachs (which has already been subpoenaed) on down is watching the securities regulator closely while spouting holier than thous about how they would never even dream of making a trade without the iron-clad laws of SCIENCE to validate the move!
Labels: hedge fund, rumors, SEC, short selling, Wall Street
Those sentenced notably include
Sam Israel's (Kinda Pathetic) Camground Hide-out
former BAWAG CEO, the former hedge fund manager who made the epically ill-advised trades (those Yen derivatives can be a bitch), a former finance chief for an Austrian union and a KPMG auditor.
Labels: BAWAG, Fraud, hedge fund, Refco
Sam Israel, Undead Fugitive
As white collar fugitive bolt-holes go, this is so, soooo weak
. Rolling into the police station on a Yamaha scooter
because his mama told him to? Seriously? This is our $2 trillion arch criminal mastermind?
I am so deflated.
Labels: Bayou Group, fugitive, hedge fund, Sam Israel
The Feds seem all but certain
P.O. Box Hedge Fund Crumbles
SEC Puts the Kibosh on San Diego Hedge Fund Manager
that the Bayou hedge fund founder's suicide was mere window dressing to a disappearing act.
I must confess... I love it when they run. As to why he'd run? If you need a reminder, try Bloomberg
. Something to do with starting a 20 year prison sentence, I'd think.
Labels: Bayou Group, Fraud, fugitive, hedge fund, Sam Israel, suicide
FBI Directory Says Sub-Prime Investigation Leads to Hedge Fund Doors
is not exactly a name that would inspire me to invest millions. Sounds like a shady payday loan company and shady
it definitely is. The SEC has jumped on Plus Money
proprietor, Matthew La Madrid freezing his assets while they sort through his $30 million dollar hedge fund investment fraud
Labels: Fraud, hedge fund, Matthew La Madrid, Plus Money
FBI director Muller's comments
Disgraced Bayou Hedge Fund Boss Gets 20 Years
, made the annual American Bar Association Litigation Section conference in Washington, D.C. are sure to ruffle features in some quarters. Like say, BloggingStocks
, for one.
Labels: FBI, Fraud, hedge fund, sub-prime mortgage
SEC Sues Headstart Advisors
Sam Israel presided over the spectacular $40 million flame-out of the now defunct hedge fund, Bayou Group. Bayou was the hedge fund fraud and failure that really put the subject on the front page - not just the business pages. This week Israel got his comeuppance
- a sentence of 20 years and an order to forfeit $300 million to compensate his former investors for their losses.
Now if Israel had that kind of money at hand, doubtless Bayou would still be in business, so who knows whether those bilked by Bayou have any realistic chance of reclaiming their money. Still, the knowledge that Israel (and his previously convicted Bayou co-horts) will be spending a significant number of years behind bars might provide some small solace.
Labels: Bayou Group, Fraud, hedge fund, James Marquez, Sam Israel
Outlook Not Rosey for Hedge Funds, More Will Go Boom
Between 1998 and 2003, through late trading and deceptive market timing
, UK-based Headstart Advisors netted illict profits totalling $198 million according to a recently filed SEC suit
. Also named in the suit was Najy Nasser, chief investment adviser for Headstart during the time of the bad acts.
Labels: Fraud, Headstart Advisors, hedge fund, Najy nasser, SEC
Hermitage Capital Head Talks Russian Corruption
That seems to be the consensus coming out of this week's Reuters Hedge Fund and Private Equity Fund Summit
in New York.
Labels: hedge fund
Really interesting stuff here
Churchgoers Make the Best Victims
from Bill Browder of hedge fund, Hermitage Capital Management. Hermitage, which has invested heavily in Russia but is not terribly popular because of its activist approach, has found itself beset with all manner of dirty gamesmanship
. Browder himself has been charged with tax evasion, a charge he disputes, and has been barred from even entering Russia since 2006
Labels: Bill Browder, coruption, hedge fund, Hermitage Capital, Russia
Hedge Fund Dirty Tricks and the HBOS Implosion
At least that is what Hamilton Alan Bird had to be thinking when he used his religiously themed "hedge fund," XL Capital Partners swipe their money.
If these investors had done their homework they might have noted that Bird was previously convicted on criminal charges, had a 1991 bankruptcy to his credit and was once busted for practicing an insurance business without a license.
So not only was Bird a known criminal - he was a bad one that kept getting caught. No change to that pattern this time. He's been nicked again and this Friday plead guilty for his hedge funs shenanigans, small solace that might be to the trusting folks whose money he stole.
Already a Bird accomplice, the right reverend pastor pastor Doug Scott of Colorado Springs has been sentenced to 15 years probation and a sizable chunk of community service.
Let's hope that the recidivist, Mr Bird gets substantially more when he goes back before the judge in June.
For More on Bird's guilty plea, click here.
And for a little background on the XL mess, try this article
Labels: Doug Scott, Fraud, Hamilton Alan Bird, hedge fund, XL Capital Partners
Hedge Fund Fraudsters Prey on the Faithful
You'll love this article from The Daily Telegraph
- an inside look at the "dirty-tricks unit" of a London-based hedge fund. This story has all the good stuff - PIs, hacking, the obligatory sub-prime mortgage crisis connection, rogue traders, market manipulation - it's one stop shopping
Labels: Halifax Bank of Scotland, HBOS, hedge fund, private investigator, rogue trading, sub-prime mortgage
Uta-based Thompson Consulting, Inc. managed to lost $60 million dollars of investor money through its pathetic mismanagement of two hedge funds. Already down, deep in the red based on what the SEC has called "a strategy inconsistent with its representations to investors," Thompson's managers went all in on a complex options trade on the Chicago Board Options Exchange. Needless to say, that blew up in their faces, wiping out 100 well intentioned investors. A slew of civil charges are pending against Thompson and fund managers, Kyle Thompson, David Condie and Sherman Warner. We'll see how it goes from here.
Hint of Scandal Leads to Fund Collapse
Labels: David Condie, Fraud, hedge fund, Kyle Thompson, Sherman Warner, Thompson Consulting
D.B. Zwirn & Co
Lancer Hedge Fund Crew Charged With Fraud
has seen better days.
Labels: DB Zwirn, hedge fund
Interview With a Hedge Fund Manager
Michael Lauer, Martin Garvey, Eric Hauser, Laurence Isaacson and Milton Barbarosh are all facing an assortment of fraud charges in relation to their roles at Lancer Group, a now-bust hedge fund. For more on their, literal, shell-game, check out the South Florida Business Journal.
Labels: Fraud, hedge fund, Lancer, shell companies
Self Regulation For Hedge Funds?
From the, I don't think it is unfair to say obscure, N+1 magazine
. Good stuff, though - quite an interesting perspective from an anonymous hedge fund insider
Labels: hedge fund, interview
Now Available - Hedge Fund Fraud Insurance
Bayou Financial Co-Founder Gets Four Years on Fraud Charges
Shocking that an SRO proposal would come out of George Mason University
, right? I'm dubious. But you all are grown folk. Judge for yourselves
, via the Harvard law School Corporate Governance Blog
(which is mighty good, by the way -- Bookmark It
Labels: George Mason, hedge fund, JW Verret, self regulation
Update on the Death of Circle T Hedge Fun Founder, Seth Tobias
James Marquez, co-founder of Bayou Financial, plead guilty in December of 2006 to participation in the $400 million fraud arising from his former firm (Marquez left Bayou in 2001).
Sentenced just this week, Marquez, in addition to spending a little over four years in prison and another two years under supervised release, Marquez is expected to pay over $6 million in restitution.
Two other former Bayou executives, Sam Israel and Daniel Marino have also plead guilty in relation to the fraud.
For further details on the Marquez sentencing, check out CNNMoney
Labels: Bayou Group, Daniel Marino, Fraud, hedge fund, James Marquez, Sam Israel
Man Group Hedge Fund Pays $75 Million Settlement to End Fraud Probe
Portfolio magazine has posted the most recent details on the Seth Tobias case
as well as the likely outcome of the Tobias estate. Gruesomely, Portfolio has also posted a recording of the 911 call made by Tobias's wife on the night of his death.
Labels: Circle T, hedge fund, Seth Tobias, suicide
Portos Chief Takes Surprise Plea
MF Global, the NY based hedge fund offering from the Man Group has agreed to pay $75 million
to settle charges that the fund helped to hide the $180 million Philadelphia Alternative Asset Management (PAAM) hedge fund fraud
(in which founder Paul Eustace was recently charged). The CTFC shut down PAAM in 2005 for hiding its own losses from investors.
Labels: CTFC, Fraud, hedge fund, Man Financial, Man Group, MF Global, PAAM
Sentencing Delayed on Bayou Hedge Fund Co-Founder
Michael Mendelson entered an unexpected guilty plea at what was supposed to be a preliminary hearing relating to allegations of fraud at his now collapsed Toronto-based hedge fund, Portus Alternative Asset Management.
Apparently he is, as the judge in the case believes, a changed man and accepted a two year sentence as well as responsibility for his actions.
Mendelson will also be testifying against his former (and quite literal) partner in crime, Boaz Mason. But Mason, perhaps a less transformed individual, won't be showing up any time soon. He fled Canada for Israel to avoid prosecution.
The disintegration of Portus left about 26,000 wondering what had become of the $750 million they had placed in the care of Mendelson and Mason.
The good news is, in this case, investors expect to get back more than 90% of the funds. We'll see how that goes. More on Portus, Mendelson and Mason right here, via the National Post
Labels: Boaz Mason, Fraud, hedge fund, Michael Mendelson, Portus
Regulators Rebuffed in Investigation of Cayman-Based bear Sterns Funds
Bear Sterns Faces Conflict of Interest Charges from Massachusetts Regulator
Bayou Hedge Fund co-founder, James Marquez saw his sentencing hearing was moved to today, November 20th due to "disputed issues of fact
." As of this evening nothing notable has come across the wire. But we'll keep an eye out.
If you'd like to recap, here's Marquez's guilty plea
from late last year. Bayou, of course, was one of the more notable hedge fund flameouts of the past few years and the one that started putting these stories on the front page, not just the front page of the business section.
Labels: Bayou Group, Fraud, hedge fund, James Marquez
Hedge Funds Facing Capital Outflow
The already reeling-from-writedowns Bear Stearns
is facing charges that it violated the Massachusetts Uniform Securities Act
. As you might expect, given the current business climate, this all finds its way back to hedge funds, colateralized debt obligations and the Cayman Islands.
Labels: Bear Stearns, colateralized debt obligations, hedge fund, mortgage backed securities
How Institutional Investors Can Strengthen Corporate Governance
Haligiannis Facing Extradition to the U.S., Additional Charges in Greece
After two years of regulatory kerfluffle, market dilution and sub-par returns in the industry, this doesn't come as a total surprise. Still the hedge fundies are putting a brave face on things. Further details via Financial News Online
Labels: hedge fund, Philippe Jabre
Hedge Fund Fugitive, Haligiannis, Back Behind Bars
is really coming home this time, it seems. But before he returns to the states to do his time, Greek authorities apparently have a few new books to throw at him
Labels: Angelo Haligiannis, Fraud, hedge fund
Hedge Funds Gain By Investing in Chinese Police State
Sub-Prime Mortgage Woes or No, Hedge Funds Still Offering Fat Bonuses
is a colorful characters. He, until recently, was also a fugitive, on the run from fraud charges
in New York state. Of course, for Haligiannis, on the run included more yachts, cocktails and fancy hotels
than your average fugitive.
The former president of hedge fund Sterling Watters, Haligiannis had been arrested just recently
by Greek authorities, only to be released prior to extradition to the U.S. Haligiannis was picked up again this week
in Greece while passing through a tollbooth. We'll see if he makes it back to the U.S. this time.
Labels: Angelo Haligiannis, Fraud, fugitive, hedge fund
Conde Nast Portfolio... Welcome to My Radar
Is it me or does the hedge fund fraud of the week story seem to have abated? Lagging returns and relatively mundane catalysts for implosion like overindulgence in the sub-prime mortgage market
make for dull blogging. In some good news, senior fund managers can still expect to rake in the fat cash! Salaries are up 40 to 50% since 2002, according to the UK's Independent.
Labels: hedge fund, salaries
The Daily Caveat
Bayou Hedge Fund Sentencing Update, Also Investor Suit Dismissed
is a simple man and not one routinely given over to reading CondeNast. But darn it if their Portfolio
online imprint (currently in oh-so Web2.0 BETA) hasn't been worming its way to my attention over the last week or so. A few examples:
Lets start with the quick piece on the HP spying lawsuits
, a topic discussed in this space only yesterday. As an amusing corollary, there's also this somewhat tongue in cheek guide to surviving corporate spying
And there is this very interesting story on a couple of hedge fund managers who are currently suing their former law firm, Akin Gump,
for what they've come to see as seriously bad advice on what does and does not constitute illegal trading.
For something a little more lo-fi, check out this piece on a Tennessee investiation into graveyard swindlers, Quest Minerals & Exploration who perpetrated "history’s first large-scale white-collar grave robbery."
Yea, you'll want to give it a read.
Personally, I'll read anything called Blackmail, Sex & Corporate Secrets
which takes as its subject, Lord John Browne, Baron of Madingley and the former CEO of British Petroleum. So there you go...four arguments for a subscription.
Labels: Akin Gump, BP, CondeNast Portfolio, hedge fund, HP, John Browne, Quest Minerals
Sowood Capital Management in Trouble
A Bayou-related investor suit filed against Hennessee Group, a financial advisory firm has been dismissed. Hennessee was being sued for breach of fiduciary duty by South Cherry Street, LLC, which on Hennessee's say-so had invested $1.5 million with Bayou.
While proprietors of Hennessee, Lee and her husband Charles Gradante claim to have a thorough five-step due diligence process, the folks at South Cherry Street claimed that this was never conducted in the case of Bayou.
The judge found differently, deciding that Hennessee was just another sucker in a group that included the IRS and the SEC. Ouch...
Also, it appears that Bayou badguys Sam Israel and Daniel Marino will be sentenced for their roll in the hedge fund fraud as soon as September.
Further details on Bayou via Reuters
Labels: Bayou Group, Fraud, hedge fund, Hennessee, South Cherry Street
Simpson Capital Management Busted on After Hours Trading
With its assets dropping by half in the last month (and the bad press about losing $350 million of Harvard's money doesn't help
) it looks as though most of the assets of hedge fund Sowood Capital
will be bought by Citadel Investment Group
. Sowood was founded by Jeffrey Larson, former endowment manager at Harvard. After the transition of its portfolio to Citadel, Sowood is expected to close its doors
Labels: Citadel Investment Group, harvard law school, hedge fund, Jeffery Larson, Sowood Capital
Economan Breaks Down, Hedge Fund Ponzi Scheme Probed
Hasn't been a great couple of weeks for hedge funds. Add late trading Simpson Capital Management
to the list, along with owner Robert Simpson and head trader, John Dowling. They'll all be answering questions downtown
Labels: hedge fund, John Dowling, late trading, Robert Simpson, Simpson Capital Management
HBS Sued on Hedge Fund Quid Pro Quo, Chief Exec Ousted
Albert E. Parish is the Economan.
His website is a must-see
. He's also the target of a government investigation
into his financial management practices, which ended up costing his clients millions. Parish's assets are currently at auction
in an attempt to make back some of the money he lost. You can view the items here.
Labels: Albert E. Parish, Fraud, hedge fund, ponzi scheme
Bayou Hedge Fund Advisor Pleads Guilty to Tax Evasion
Swiss banking giant UBS
is in hot water over its hedge fund hotelery. Recently sued for “dishonest and unethical” practices in dealings with hedge fund advisers
by regulators in Massachusetts, UBS is facing intense scrutiny over the perks it provided to hedge fund managers.
UBS is accused of engaging in some righteous quid pro quo
in an effort to keep managers' business and catch up to rivals Goldman Sachs and Morgan Stanley in the $8 billion dollar hedge fund brokerage fee sweepstakes. UBS had previously been forced to shut down its own in-house fund, Dillon Read Capital Management
, after it suffered catastrophic losses in the sub prime mortgage industry.
In a surprise statement today, the UBS board announced that it is dumping its chief executive
, Peter Wuffli
. One has to imagine that the aforementioned travails had something to do with the board's lack of confidence in him.
Labels: Dillon Read, hedge fund, sued, UBS
KL Hedge Fund Operator Plead Guilty
Bayou would be the hedge fund whose collapse brought questions about hedge fund transparency from the business page to the front page. The reverberations from the Bayou collapse continue, most recently with the guilty plea on tax evasion
from former Bayou financial advisor Burt Kozloff. You can get a look at the terms of Kozloff's plea deal right here
, courtesy of the fine folks at the U.S. Attorneys Office, Souther District of New York.
Labels: Bayou Group, Fraud, hedge fund
MDL Capital Management Founder Has Trial Date Set
Yung B. Kim one of the three principles of KL Financial, a Florida-based hedge fund plead guilty last week to bilking investors our of $195 million. Kim ran the show along with his brother, John Kim and another man, Won S. Lee. John Kim is already behind bars on a contempt of court charge. Won Lee is still at large. Sentencing for Yung Kim is scheduled for November.More on the case from the Palm Beach Post
Labels: Fraud, hedge fund, KL Financial
Hedge fund (fiend?) Mark D. Lay
, who lost a whole bundle of the Ohio Bureau of Worker Compensation's money now has a trial date. Indicted by a federal grand jury just last month, Lay will face the music on September 4th, when he'll get a chance to tell his side of the "I pissed away $216 million of your money" story. And good luck to him. Further details on the trial here
Labels: Fraud, hedge fund, Mark Lay, MDL Capital Management, Ohio
Bear Stearns Hedge Fund Troubles Leads to Calls for Greater Transparency
Ok, follow me here.... Chris Cooper-Hohn is a hedge fund hot-shot, known for wielding his portfolio like a flaming baseball bat
at uncooperative corporate board. He's also, seemingly, a pretty good dude. Each year he donates a third of his fund's management fees to his own childrens' charity (he has a childrens' charity - see, good dude). However, and here's the catch, of the nearly half a billion dollars
donated only about 10 million went back out the door as actual charity. The rest? It was reinvested in TCI, Cooper-Hohn's own investment fund... Good dude, but he doesn't miss a trick. More on Cooper-Hohn here
Labels: charity, Chris Cooper-Hohn, hedge fund, TCI
French regulator levies million dollar fines against hedge funds
year old High-Grade Structured Credit Fund turned out to be anything but
- as of April 30 it was doen 23% on the year. In fact BS will have to jack up the fund by a billion and a half dollars just to keep it afloat. Hard to value assets and hard to assess strategies made the fund less than marketable. Bear Stearns "no questions" policy
wasn't exactly a draw, it seems.
Labels: Bear Stearns, hedge fund
Hedge Fund Strategies in Box
French regulator, Autorite des Marches Financiers this week lay down fines against various banks and investment firms
for, well, I believe the French term is shenanigans,
in relation to the AMF's insider trading probe of the 2002 Vivendi Universal securities.
Amongst the financiers being hit are: Deutsche Bank AG and four hedge funds including GLG Partners, UBS O'Connor, Ferox Capital Management and Meditor Capital Management.
Labels: AMF, France, hedge fund, insider trading
Interesting article from the FT
Washington Post Profiles Richard C. Breeden
about how plug-and-play quant models are allowing investment managers to replicate hedge fund-style returns without the high management fees (and occasional scandal) typically associated with hedge funds. Some heavy hitters are getting into the replica game including Goldman Sachs, Merrill Lynch and JP Morgan - more here
Labels: hedge fund, replicas
Enron's Arnold Makes Good (Really Good) With Centaurus
As we've discussed before
, former SEC Chair Richard C. Breeden has been busy turning his talents toward money management. The Washington Post offers an update
on what's up one year in for Breeden's $1billion investment fund.
Labels: hedge fund, Richard Breeden, SEC
Fortune Favors Ken Griffin of Citadel Investment Group
Interesting profile of John Arnold
via The Guardian
. Arnold started out his career as an energy trader with the now infamous Enron. A bet that oil prices would fall last year put his hedge fund, Centaurus Energy into the stratosphere and earned Arnold himself a top spot on the list of highest paid financial sector executives. I am sure, also, that his clients do quite well... via
Check out The Guardian for more on John Arnold
, as well as the other top earners in the hedge fund sector.
Labels: Centaurus Energy, energy trading, Enron, hedge fund, John Arnold
Anchor Point Hedge Fund Manager Sets Up Mistress for Abducted, Raped
Pretty interesting Fortune profile of Chicago-based hedge funder, Ken Griffin, founder of Citadel Investment Group. Readable here, via CNN Money
Labels: Citadel Investment Group, hedge fund, Ken Griffin
UBS Employee Faces Charges for Selling Tips to Hedge Funds
Albert Hsu, co-founder hedge fund Anchor Point Capital LLC, Connecticutt placed a personal add in a local paper, posing as his mistress, soliciting for a stranger to abduct and rape her as a part of a sexual fantasy. Honest kink? Not hardly.
Email exchanges between Hsu and a would-be attacker revealed to police indicated that Hsu's motive was hatred not...well...whatever the other less illegal but still creepy one would be. Fearing for the life of Hsu's mistress, the police intervened, arresting Hsu on charges of attempted kidnapping and attempted sexual assault, along with other charges.
More on Albert Hsu's arrest at The Boston Herald
Labels: Albert Hsu, Anchor Point Capital, assault, hedge fund, kidnapping, kinky
Hedge Fund Dinner Scammers Face Charges
The skinny....via BusinessWeek
...BusinessWeek has learned federal authorities are on the verge of busting a scheme in which at least one employee of UBS (UBS) was allegedly selling information about upcoming changes in analyst ratings on stocks to traders not affiliated with the Swiss investment firm.Read the rest
Sources says federal prosecutors in New York and securities regulators in Washington will soon file charges against a number of individuals caught up in the investigation, which has been going on since last fall. Criminal and civil charges could be filed as soon as Tuesday.
Investigators have found that traders working for at least two unidentified hedge funds were paying a UBS employee in New York for the information about impending ratings changes on stocks. But other traders were also buyers...
Labels: bribery, hedge fund, homeland security, investigation, UBS
Shady Hedge Fiend Kirk Wright to Pay $20 Million
You get some junk mail that offers above-market investment returns and an invite to a steak dinner. You figure, why not. After all, you like steak. But if the guy you dined with was John H. Williams, odds are he conned you into giving him your money, which instead of multiplying as promised he might as well have set a'fire right there at the table.
You see Williams, your host, was funneling your funds to Stephen Chesnowitz, a Canadian hedge fund trader with assets in the Cayman Islands and Canada. Now, actually disclosing that you have no idea how to run or manage a successful investment fund would sort of...impede the cashflow situation. So, rather than inform investors when deals went sour, these guys simply followed the tried and true falsify your financials
model while maintaining rich salaries for themselves.
All told, the pair bilked about $9 million out of 150 or so unwitting investors. Williams is facing fraud charges
in Maryland, while Chesnowitz is so far sitting pretty north of the border. Maryland is currently reviewing William's financial records, trying to determine where the money when and if any has been squirreled away that might be recoverable for investors.
Further details at The Washington Post
Labels: Fraud, hedge fund, John H. Williams, LaJohn Capital, Stephen Chesnowitz
Jabre Capital Partners Makes Investment Management Backend Choice
Kirk Wright made white a name for himself. Having found his way on to the NFL Player's Union's list of recommended money managers, Wright, as my grandmother would say, fell in butter.
He had it good. Only one problem...he was a total phony
(well, that diploma from Harvard was real).
Between 1997 and 2006 Wright raised $185 million for his International Management Associates hedge fund management company. The money came from a pool of 500 investors, including many NFL players. Wright lived the high life
on their money while giving vague assurances of amazing returns. Later he filed bogus financials to cover his tracks.
When it was clear he was busted, he took flight
and played fugitive
for a few weeks before coming to his current berth at an Atlanta-area detention center. Wright is awiating trial on multiple fraud counts and could face some lengthly time behind bars.
In the interim U.S. District Court Charles Pannell has levied over $20 million in fines and restitution to be paid back by Wright.
Further details via HedgeCo
Labels: Fraud, hedge fund, Kirk Wright, NFL
Morningstar Gives the Rundown on the SEC's Frontrunning Investigation
I wish that there was more to tell about goings on with Philippe Jabre's new venture. Since returning from semi-exile and re-entering that asset management arena, the business community has been hungry for every detail of the former GLG star's next move. So here it is. Not earth shaking, but news nonetheless: Jabre Capital Partners has selected Sophis
to provide the back-end architecture the firm's portfolio and investment management.
Labels: GLG, hedge fund, Jabre Capital Partners, Sophis
G-7 Names Hedge Funds to Axis of Evil
Have brokers been tipping off hedge funds about pending mutual fund trades to help the hedgies (who have supplanted benefit mutual funds as brokers biggest client base) benefit from pending trades? Undoubtably this frontrunning
practice exists and the SEC aims to find out exactly how endemic it has become. Morningstar's got the deets
on the pending SEC investigation.
Labels: front running, hedge fund, homeland security, investigation, SEC
CFTC Files Complaint Against Cornerstone Capital Management
Ok, well...not quite. But they're going to be watching you guys very closely
. Closer to home, the SEC is heating up its investigation into front running
...taking a hard look at whether hedge funds are inappropriately benefiting from inside info supplied by investment banks. Other inside-the-beltway regulatory maneuvers are also afoot, including:
High-ranking Treasury Department officials held 15 meetings over three days last year with representatives from prominent hedge funds, investors, lawyers and others to gather information about hedge funds' operations. Next week, the President's Working Group on Financial Markets -- comprising leaders from the Treasury, the Federal Reserve Board, the SEC and the Commodity Futures Trading Commission -- will meet and consider issuing a statement that highlights the importance of the funds to the market and the risks, insiders say.
More on potential regulation and the steps the hedge fund industry are taking to prevent it, via The Washington Post
Labels: front running, hedge fund, investigation, regulations, SEC
Wood River Capital Hedge Fiend to Face Criminal Charges
New York-based hedge fund, Cornerstone Capital Management
and company executive Joseph Profit (oh come on
- he made that name up!) are facing fraud charges from the Commodity Futures Trading Commission
. The CTFC complaint, filed in the Georgia Northern District Court accuses Profit and Co. of concealing material information from the National Futures Association and defrauded investors by missrepresenting potential rates of return.
Further details via Hedgeweek
. You can check out Cornerstone's NFA suspension here
as well as the CTFC press release here
Labels: CFTC, Cornerstone Capital Management, Fraud, hedge fund, Joseph Profit
Actor's Mom (and Hedge Fund Manager) Busted in Fraudulent Trading Scheme
John H. Whittier, the former head of defunct hedge fund Wood River Capital Management was arraigned in New York this week
on charges stemming from the $88 million securities fraud he perpetrated on investors
in 2004 and 2005. The SEC originally filed civil charges
against Whittier and WRC back in October 2005
. Whittier could serve as much as 20 years on each count.
Labels: Fraud, hedge fund, John Whittier, Wood River Capital
Directors Financial Group
Forbes Calls Attention to Unsavory Pipes Deals (and the unsavory people behind them)
, an Illinois hedge fund operated by Sharon Vaughn has been ordered to distribute its assets to investors - some $25 million - based on an SEC complaint filed last March
The SEC accused Vaughn of defrauded clients in the by investing in a fraudulent prime-bank trading scheme, noting that Vaughn failed to perform adequate due diligence and neglected to disclose her trading strategy to investors. She followed this up by withholding and then submitting fraudulent documents to the SEC.
In addition to the order to dispense DFG's assets Vaughn will also pay a $200,000 penalty. The U.S. Attorney's Office for the Northern District of Illinois has also put forth indictments for the two promoters who sold Vaughn on the dodgy bank trading scheme in the first place.
Interestingly, Sharon Vaughn is the mother of actor Vince Vaughn
More here on Vaughn, via Financial Alternatives.
Labels: Directors Financial Group, Fraud, hedge fund, homeland security, Sharon Vaughn, Vince Vaughn
Hedge Funder Sentenced on Charges of Stock Manipulation
Shady deals and shadier folk....
Check out the article by Nathan Vardi,
appearing in the Feb 12, 07 issue of Forbes.
Labels: hedge fund, PIPES, shady
HMC International Fraudsters Agree to Pay Restitution
Scott Sacane, formerly of Durus Capital Management LLC, plead guilty in December 2005
to manipulating the stock price of two biotech companies by intentionally concealing purchases of shares
through false filings with the SEC. Sentenced this week
, Sacane will serve three years in prison and another three under supervised release.
Durus Capital's former chief operating officer, J. Douglas Schmidt was previously convicted on related charges and sentenced to a year's probation and a $10,000 fine.
Labels: Durus Capital Management, hedge fund, J Douglas Schmidt, Scott Sacane, stock manipulation
The SEC has announced that Bret Grebow and Robert Massimi, the dynamic duo behind the defunct Philadelphia-based HMC International hedge-fund-slash-ponzi-scheme have agreed to pay restitution to their former investors in order to settle pending charges relating to their misuse of investor funds. Details here.
Recapping Bayou: Analysis of a Hedge Fund Fraud
Labels: Bret Grebow, Fraud, hedge fund, HMC Internationa, ponzi scheme, Robert Massimi
SEC Proposes New Hedge Fund Regs
Lets go back to last fall and recall the implosion of hedge fund, Bayou Group
. The failure of this multi-million dollar fund sent shockwaves through the business media and was one of the key factors in raising the profile of hedge fund fraud in the press. Heck, it even prompted Risk Magazine
to give a call to The Daily Caveat
for a brief interview
Law.com has a post-game analysis of the Bayou collapse
from Jeff Marwill, a partner in the bankruptcy practice of Jenner and Block
. Marwill charts the organization of the Bayou entities, what went wrong and how investors were made to eat the losses. Bayou Group subsequently declared bankruptcy and Marwill is uniquely qualified to comment on the aftermath as, in April '06 , he was appointed the federal equity receiver
responsible for aiding investors in recouping some of the $450 million lost in the Bayou Fraud.
Interesting reading. And as always, when it comes to investing - do your homework
Labels: Bayou Group, Fraud, hedge fund, Jeff Marwill, Jenner and Block
Institutional Investor Daily
The Wall Street Self Defense Manual
has the coverage on new proposals from the SEC for how the agency will handle hedge fund regulation. The securities regulator faced a setback in this arena several months back when it came out on the losing side of a court battle
over its existing hedge fund regs.
Check out the dailyii post
for more details on what hedge funds and their burgeoning numbers of investors can expect from the SEC in the new year. You can also check out the SEC proposed rules here
Labels: hedge fund, homeland security, Phillip Goldstein, regulations
Hedge fund humor
New Jabre Venture Collects More Talent
(sort-of) from the notably notorious Henry Blodget
over at Slate
. Click through
and you'll find an excerpt from Blodget's book The Wall Street Self Defense Manual
On sale here
Labels: hedge fund, Henry Blodget, Slate, Wall Street
Philippe Jabre Returns to Hedge Funding
Ziad Tabet of Citibank has resigned to join Philippe Jabre's new venture
, Jabre Capital Partners. Details here
Jabre has already wooed James Saltissi and Daniel Horsely from GLG as well as former Morgan Stanley head of risk management (and Jabre brother in law), Philippe Riachi.
Labels: Citibank, hedge fund, Jabre Capital Partners, Philippe Jabre, Tribeca, Ziate Tabet
Would You Invest Your Money in Something Called the Viper Fund?
The non-compete from GLG
is over. With his personal scandal is more or less behind him
and Philippe Jabre is getting back on the horse
. Jabre has opened Jabre Financial Services in Switzerland and is building up his initial staff with some notable friends and family, including former GLGers, James Saltissi and Daniel Horsely and former Morgan Stanley head of risk management (as well as brother in law), Philippe Riachi. $2.5 billion is the year one target for assets under management.
Jabre had previously opened a firm called Ballena Captial
, which was a vehicle for managing his own substantial wealth. The launch of Jabre Financial Services marks his return to managing other peoples money.
Labels: Ballena Capital, FSA, GLG, hedge fund, Jabre Financial Service, Morgan Stanley, Philippw Jabre
How did The Daily Caveat
miss this one? In early November the SEC put the kibosh
on a group of California-based hedge funds run by a gentleman named Edward Ehee. Ehee was the proprietor of several funds, including, the Compass West Fund, the Viper Founders Fund, and the Viper Investments.
Shockingly, or perhaps not so, the SEC has seized the funds assets, alleging that Mr. Ehee diverted client funds to cover a variety of personal expenses, including car payments (any question about what he drives?). While Ehee's funds essentially ceased any kind of legitimate operation back in 2002, as recently as this year he was still peddling phony financials and convincing trusting souls to hand over their money for him to manage.
But no longer.
You can download the SEC's compliant here
and the link above leads to their press release.
And of course, being a few days late, but unable to pass on the story, will teach me not to read Dealbreaker
Labels: Dealbreaker, Edward Ehee, Fraud, hedge fund, SEC, Viper