Each business day HedgeCo.Net keeps you informed with the top hedge fund industry news, opinion and insight from around the globe. From the latest hedge fund launches, to the impact of regulation, competition, and investor activism - we track the topics and people that make a difference to you.
Forbes – U.S. prosecutors said on Tuesday that two former Bear Stearns Cos hedge fund managers facing trial on fraud charges are trying to impede the government’s access to documentary evidence.
Lawyers for one of the accused, Ralph Cioffi, described the allegations as ‘false and inflammatory’ as the government asked a judge for a hearing to review Cioffi’s pre-trial release on $4 million bond and travel restrictions.
First Post – German prosecutors are investigating executives at the sportscar firm over allegations of share-manipulation.
Porsche denied any disclosure irregularities but many hedge funds and investment management firms were left wrong-footed after it made a shock announcement that it held more than 50 per cent of VW’s shares. German regulator BaFin dropped its initial investigation but re-opened it after claims that the incident was bringing the entire German stock market into disrepute.
Ex-chief executive Wendelin Wiedeking is among the Porsche figures being investigated by the German authorities over share manipulation claims. Yesterday Porsche’s headquarters were raided in the course of investigations into recent trading activities.The allegations revolve around the failed takeover of Volkswagen, during which Porsche took large positions in VW stock. Prosecutors allege that inside information was leaked in pursuit of the failed bid.
Daily Telegraph – The funds collapsed as billions of dollars of bets made on mortgage-backed bonds and collateralised debt obligations (CDOs) unravelled, and when the time came to try to sell some of the funds’ sub-prime mortgages, no one wanted to buy them.
At the centre of those funds sat two men – hedge fund manager Ralph Cioffi and Matthew Tannin, the chief operating officer of Bear Stearns Asset Management (BSAM) – who were arrested a year later and charged with several counts of wire and securities fraud, following the loss of $1.4bn of investors’ money.
They face possible 20-year prison sentences, though both have consistently pleaded their innocence. The case against them will be set out at a trial slated to start in October. It centres on emails between the two – and with investors – in which both funds were referred to as "an awesome opportunity", despite allegations that both men knew of the problems within them.
Reuters – Hedge fund firm Perry Corp will pay $150,000 to settle accusations that it failed to report a substantial stake in Mylan Inc, purchased to support a proposed 2004 takeover of King Pharmaceuticals, the U.S. Securities and Exchange Commission said on Tuesday.
The New York-based firm, led by Richard Perry and with $8.8 billion under management at the end of March, settled without admitting or denying the allegations.
UPDATE: HedgeCo.net (West Palm Beach) – Najy N. Nasser, Chief Investment Officer of the Bahamas/UK based hedge funds, Headstart Advisers Limited (HAL) and Headstart Fund, has agreed with the SEC to pay $17.8 million in a settlement regarding a 2003 alleged late trading scheme.
Without admitting or denying the allegations, the civil settlement includes payments of $17 million by the defunct Headstart Fund Ltd (domiciled in the Bahamas), $200,000 by Headstart Advisers Ltd and $600,000 by Mr Najy Nasser, the Chief Investment Officer. This settlement will conclude the case brought by the SEC against Headstart Fund Ltd, Headstart Advisers Ltd and Mr Najy Nasser arising from Headstart’s historic market-timing strategy.
The Commission’s Complaint alleged that the Bahamas hedge fund, Headstart, acting through its United Kingdom investment adviser, HAL, engaged in fraudulent late trading and deceptive market timing of U.S. mutual funds through accounts at U.S. broker-dealers. Headstart has since September 2003 focused its business on other successful strategies.
Nasser said in response to the settlement, “Headstart is very pleased to have reached a settlement. We responded to US concerns about market timing and immediately ceased this element of Headstart’s business in September 2003. We have since worked hard to build up Headstart’s funds using different strategies. As we equalled or bettered our overall returns against our benchmark, we are especially pleased with what we have achieved.
"We have superb long-term performance against both the market and our peer group and have some interesting plans to grow Headstart’s investment business,” he concluded.
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Houston Chronicle – A London-based hedge fund manager and its chief investment officer have agreed to a nearly $18 million settlement resolving U.S. regulators’ allegations that one of its funds defrauded U.S. mutual funds and investors through trading practices such as market-timing.
The Securities and Exchange Commission and Headstart Advisers Ltd. on Monday separately announced a settlement in which the firm neither admitted nor denied allegations covering the period September 1998 through September 2003.
Headstart Fund Ltd., a hedge fund that had been incorporated in the Bahamas and is now defunct, will pay a $17 million penalty to resolve a complaint the SEC brought in April 2008. London-based Headstart Advisers will pay an additional $200,000, and Chief Investment Officer Najy N. Nasser will pay $600,000. The firm and Nasser are also barred from future violations of antifraud provisions of U.S. securities laws.
Reuters – Hedge fund industry icon Arthur Samberg’s startling decision to shut Pequot Capital shows how a firm’s reputation matters as much as its returns.
For decades Samberg, who founded Pequot more than two decades ago, delivered strong performance no matter how markets behaved, enticing investors to funnel in so much cash that the firm managed $15 billion in its heyday in 2001. When the U.S. government last year reopened a probe into allegations of insider trading in Microsoft Corp, skittish investors left quickly.
BNET – A hedge fund Ponzi scheme scandal is breaking in the blogosphere – and it goes right to the top of political power. A little while ago, blogger John Hempton, who writes Bronte Capital, a finance blog, started sniffing around Connecticut-based hedge fund Ponta Negra.
Hempton didn’t like what he found. After legal threats from the fund’s lawyers, Hempton retreated until a court ordered a freeze on the assets of Ponta Negra fund manager Francesco Rusciano amid allegations he lied to investors to raise more than $30 million. After that, the blogger published his findings.
New York Times Blogs – The inquiry into corruption at the New York State pension fund started simply enough. Alan G. Hevesi, the former comptroller, was accused of using state workers as chauffeurs for his ailing wife.
But by the time Mr. Hevesi resigned his office in late 2006, investigators for the Albany County district attorney’s office were examining a more troubling problem: allegations that Mr. Hevesi’s associates had sold access to the state’s $122 billion pension fund, using one of the world’s largest pools of assets to reward friends, pay back political favors and reap millions of dollars in cash rewards for themselves, The New York Times’s Danny Hakim and Mary Williams Walsh reported.
SmartBrief – Carlyle Group is being investigated by New York prosecutors and the Securities and Exchange Commission for allegations that it made improper payments to get investments from the state’s pension fund.
The payments allegedly were made to intermediaries and might have totaled in the millions. The investigation involves several investment companies and a practice that has long been considered standard by hedge funds and private-equity firms.
Bloomberg – Randy Shain said he wasn’t stunned when hedge-fund managers Paul Greenwood and Stephen Walsh were arrested last month for allegedly misappropriating $554 million in client funds.
A probe three years ago by his First Advantage Investigative Services LLC found in public documents that a brokerage run by the pair had agreed to settle regulators’ claims that it improperly used customer assets as loan collateral and had been fined at least 11 times for violating rules at several U.S. exchanges. The firm neither admitted nor denied the allegations, which covered actions from August 1985 to January 1986.
Reuters – Investment adviser MAG Capital and its owner settled U.S. regulators’ claims that it took warrants from three hedge funds it advised without compensating them, the U.S. Securities and Exchange Commission said on Tuesday.
The Los Angeles-based investment adviser and owner David Firestone, without admitting or denying the SEC’s allegations, will pay $100,000 and $50,000, respectively, to settle the SEC’s complaint.
On 44 separate occasions, between 2003 and 2006, MAG took warrants from its clients without compensating their funds for them, the SEC said.
According to the SEC, MAG’s hedge fund clients made investments in so-called private investment in public equity (PIPE) transactions.
The PIPE transactions included warrants and other securities. The hedge funds paid for the warrants as part of the bundle of securities sold by the issuers in the transaction.
However, MAG took a portion of the warrants in each transaction and did not compensate the hedge funds for the warrants it took, the SEC alleged.
