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.
New York (HedgeCo.Net) – Hedge fund fraudster Salman Shariff has been sentenced to 57 months behind bars, years after swindling millions from trusting investors.
The Miami-based funds raked in almost $11 million from 1998 to 2001, while Shariff afforded himself all of the luxuries indigenous to South Florida, including an oceanfront South Beach condo, a Ferrari Testarossa and a 43-foot yacht. Shariff also purchased a modeling agency and gave it to his girlfriend to run.
Shariff had admitted guilt at his plea hearing earlier this summer. The ponzi-like scheme took place within several funds, including Vestron Investment Club and Crescent Capital.
Ponzi-schemes are commonly found in cases of hedge fund fraud. They involve using new capital coming in to pay “returns” to existing investors. Investors are usually duped into thinking the fund is posting admirable returns, when in fact, the fund is probably suffering.
Shariff admitted to exaggerating the performance of his funds in order to present them in a favorable light. When the fund was experiencing sharp losses, Shariff claimed it was posting returns between 58 and 86 percent.
Shariff had been on the run until February, when FBI agents tracked him down in Queens. In addition to his sentence, U.S. District Court Judge Federico A. Moreno insisted on an extra three years of supervised release.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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New York (HedgeCo.Net) – Turnberry Capital Management LP has decided to close its doors and liquidate its assets, after many investors inquired about getting their money back. The hedge fund, which specializes in purchasing distressed debt, once held approximately $800 million under management.
"We intend to take a series of steps to liquidate the Fund and redeem all Fund investors at the same pace," Portfolio Manager Jeff Dobbs wrote in a letter to his clients. “After Labor Day, we will commence a sell-down of the Fund’s security holdings in order to raise cash to fund redemptions.”
Being careful not to waste any potential marketing platform, Dobbs also added that he is planning to own a corporate bond portfolio, and that anyone who has an interest in learning more may submit a request.
About 70 percent of the credit derivative book has already been liquidated.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
New York (HedgeCo.Net) – Merrill Lynch and Citigroup, two banks that have already written down billions in losses, will buy back $30 billion in auction-rate securities as part of an agreement with regulators.
This comes after the threat made by New York Attorney General Andrew Cuomo, who said he would sue Citi for misleading trusting investors about the high risks associated with such securities.
Merrill then followed suit, and other big names firms like Morgan Stanley and Bank of America are expected to strike their own deals with state regulators and the SEC in the near future.
These securities, which accounted for nearly $350 billion, are backed by municipal bonds and other forms of debt, and were peddled as being “safe.” However, the credit crunch blindsided most banks, and those securities were quick to plummet in value.
Citi has to shell out the most cash, agreeing to purchase $7.5 billion in securities and promised to purchase another $12 billion from institutional investors. On top of it all, they were slapped with $100 million in fines. Merrill has agreed to buy back $10 billion in the auction-rate securities.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
New York (HedgeCo.Net) – The private equity firm Carlyle Group will liquidate its lone hedge fund, after stating that it failed to achieve “critical mass.”
The fund, Carlyle-Blue Wave Partners Management LP, was a multi-strat fund launched by Rick Goldsmith and Ralph Reynolds. The two managers previously served as co-heads of global equity derivatives at Deutsche Bank.
"This is an orderly liquidation to ensure fair and equitable treatment of all investors," said Carlyle spokesman Chris Ullman.
The fund was among many to suffer losses fueled by the credit crisis that starting brewing last summer. After posting losses in 2007, the fund looked to be turning around and even showed gains of 2 percent in 2008. However, Carlyle said they could not keep up with the cost associated with staff and infrastructure and decided to go forth with the liquidation.
According to a statement published on the company’s website, the fund was "launched in a challenging market and [has not] been able to achieve the critical mass of assets under management necessary to support a multi-strategy fund infrastructure."
Assets under management are now estimated at $600 million, $300 million less than its peak.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
New York (HedgeCo.Net) – TD Waterhouse has been ordered to pay a $2 million fine as a result of selling hedge funds to clients who were not accredited, according to a report by the Vancouver Sun.
The Investment Industry Regulatory Organization of Canada claimed that TD “failed to establish and maintain alternative investment review or approval procedures,” while failing to “ensure that the purchase of hedge funds were appropriate for its clients.”
The Olympus hedge funds were sold from 2001-2005 and were the subject of complaints from 31 TD Waterhouse clients. Their chief problem with the funds was that they were portrayed as a safe, low risk investment.
Hedge funds, while they may enjoy lighter regulation than most traditional investments, must adhere to strict guidelines when it comes to who may invest in them. Because hedge funds are thought to carry most risk than other investment vehicles, the investor must possess the status of being “accredited.” Since accredited investors are thought to be sophisticated and educated in the realm of investing, hedge funds can therefore enjoy the benefits of lighter regulation.
According to Alex Popovic, Vice President of Enforcement at IIROC, the fine was reduced because of TD’s willingness to cooperate and a number of things they implemented internally to help correct the problem. These include new training programs and controls, as well as the discipline of brokers who sold the funds to unqualified clients.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
New York (HedgeCo.Net) – While the aftermath of the collapsed Bayou hedge fund may have left investors with nothing more than shock, the U.S. Marshals are trying to recoup some of the losses that were suffered. By selling Bayou’s failed investments, they are recovering some $115 million from the fund that once squandered over $300 million.
"You can’t believe some of the stupid investments these people made,” said Leonard Briskman, Deputy Chief for Business Management for the U.S. Marshals in an interview with Bloomberg. “The Bayou guys lost money during the late ’90s when almost everybody was making money in the market without even trying.”
Briskman is in charge of heading Bayou’s liquidation sale, in what has become a much more prominent role for the Marshals service with the rise of white collar crimes.
Investments aren’t the only thing being liquidated, however. U.S. District Judge Colleen McMahon ordered Israel to turn over his scooter and RV, the same vehicles that aided in his escape the day he was supposed to report to prison to start serving his 20 year sentence.
Also up for bid is the Tiffany & Co. watch that Israel was wearing. These things will help go towards the $150 million in restitution that he has been ordered to pay.
The U.S. Marshals Service is currently running a portfolio estimated at $1.7 billion that include 30 businesses.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
New York (HedgeCo.Net) – American auto parts maker Delphi has been given the green light to proceed with their suit against hedge fund Appaloosa Management.
U.S. Bankruptcy Judge Robert Drain denied a request by Appaloosa yesterday to dismiss the fraud and breach of contract lawsuit that Delphi had waged against them. Delphi is attempting to collect the $2.55 billion that was originally promised to them by Appaloosa as part of their plan to exit Chapter 11.
While Judge Drain did disregard some of Delphi’s complaints, sources say he rejected the arguments of Appaloosa, including the one that stated the agreement with Delphi only allows for damages of up to $250 million.
The money was part of a bigger, $6.1 billion refinancing strategy that was promised to Delphi through various investors. After $2 billion was granted by former parent company General Motors, Appaloosa got weary of the deal and cited an overdependence on GM. One day before the deadline to walk away, Appaloosa did just that, even though Delphi had attained the rest of the financing needed to solidify the deal.
The lawsuit is scheduled to go to trial next year.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
New York (HedgeCo.Net) – Service providers for hedge funds scored a victory yesterday when a New York judge threw out a suit filed against UBS by defrauded investors.
Judge Charles Ramos dismissed the complaint in a Manhattan court at the request of UBS, who served as prime broker and custodian to the now collapsed hedge fund Wood River Partners, LP.
The investors had accused UBS of improperly profiting from the trades of the fund, and claimed that UBS had made $100 million by selling borrowed shares of Endwave Corp., the fund’s main holding.
The plaintiffs also accused UBS of creating a short market for Endwave stock while borrowing from the hedge fund’s account to buy shares. This in turn decreased the fund’s portfolio by almost $20 million, according to their allegations.
"The facts alleged do not support the causes of action,” Ramos stated. "These plaintiffs lack standing."
Investors were duped into thinking their assets were being diversified when in reality they weren’t. The hedge fund exceeded the 10% cap on ownership of any one company, though it wasn’t clear whether or not UBS had knowledge of that situation.
Nevertheless, it was a victory for service providers seeing as how recent trends show more and more of disdained investors going after affiliated or hired help by defunct hedge funds.
Investors in Wood River lost approximately $100 million. The plaintiffs of the lawsuit were made up of a group that had funneled in $79 million. John Whittier, who headed the hedge fund, is now serving three years behind bars.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
New York (HedgeCo.Net) – John Paulson, the infamous hedge fund manager turned billionaire who bet brilliantly against the housing market, will start a new fund later this year according to a report published on Bloomberg.com.
The new hedge fund will provide capital to financial institutions who have suffered losses due to mortgage writedowns. It was the exact scenario that Paulson predicted that caused the world’s largest banks to write down over $450 billion in losses stemming from the subprime mortgage fallout. In addition, it forced many hedge funds including the two from Bear Stearns that had invested in mortgage-backed securities to implode.
Paulson has not yet stated what his targets are for starting capital in the new hedge fund. Paulson made the Forbes annual list of billionaires for the first time, after taking home an estimated $3 billion in 2007. His firm, Paulson & Co. currently oversees over $33 billion in assets.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
New York (HedgeCo.Net) – Inmarsat shares took a dive yesterday after hedge fund Harbinger Capital halted talks of a possible takeover. Harbinger has amassed a 28 percent stake in the U.K.-based mobile satellite communications group.
Harbinger, who has AUM upwards of $26 billion, decided to hold off after considering the lengthy process ahead in which they would have to gain clearance from the FCC.
“Harbinger remains interested in acquiring control of Inmarsat and is therefore actively considering whether to pursue the relevant regulatory and competition approvals in order to be able to make an offer for Inmarsat in the future,” the company said.
The hedge fund expressed interest in the company in hopes that Inmarsat might contribute to a U.S development of a satellite-based mobile phone network.
“Assuming there is an acceptable conclusion to the regulatory approval process, Harbinger would intend to re-enter into discussions with the board of Inmarsat regarding the terms of an offer and endeavour to seek a recommendation from the Inmarsat board at that time,” they added.
Harbinger isn’t the only hedge fund as of late to accumulate shares in Inmarsat. Landsdowne Partners and Lehman Brothers have also been tapping into this market in hopes of consolidation in the industry.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
New York (HedgeCo.Net) – Donald Trump Jr. has plans to set up a $1 billion hedge fund that will amass property in India and capitalize on the nation’s economic growth, according to a report published on Bloomberg.com.
"The fund will be for acquisitions of real estate in the high end and across the spectrum,” said Trump. "I see a lot of opportunities. We’ll start it off relatively small and grow it as we get more familiar with the Indian market.”
Trump Organization Inc. will focus on the city of Mumbai, where they are planning the development of a hotel/residential project. Mumbai is the home of many wealthy Indians and is also the country’s biggest trading center for stocks and bonds.
"Our entry has to be in Mumbai and that’s where everything is going on right now in terms of the high-end real estate,” Trump added. "That’s the place where one is going to achieve the highest prices per square foot. It sets the tone for all of the other future developments.”
While the U.S. hasn’t fared so well, India’s real estate prices has experienced steady climbs for five straight years amidst rising incomes.
Trump may go in on the deal with other investors including an Indian family, though he didn’t get specifics as how he would go about raising capital.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
New York (HedgeCo.Net) – Disdained investors of the former Bayou hedge fund, run by one-time fugitive Sam Israel, are going after Goldman Sachs for $20 million to try and recover some of their losses.
Goldman Sachs served as the prime broker while clearing trades and taking custody of the securities. They also provided reports on the hedge fund’s investments. Reports that some say should hold them partly accountable for the $450 million that was duped out of trusting investors.
The suit, which was filed as a private arbitration case in Federal Court, claims that Goldman Sachs Execution and Clearing provided monthly statements to Bayou highlighting its losses. The reports showed more than $88 million between August 1999 and August 2005. But while the reports may have been right on, creditors claim that Goldman knew that Bayou was turning around and reporting substantial gains to investors and did nothing about it.
“Through either gross negligence or a willful choice to ignore the signs of fraud, G.S.E.C. failed to diligently investigate the red flags it was made aware of it, to contact Bayou’s auditors to request additional information, or to alert the appropriate authorities of what it had learned,” the suit alleges.
In 2004, Bayou provided Goldman with reports that claimed it had earned returns of almost 18 percent since its inception, which the suit says was “completely inconsistent with the actual returns the Bayou Funds had been realizing in their trading accounts at G.S.E.C., in which they had done nothing but lose money.”
Goldman has declined to comment.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
