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.
Hartford Courant – A federal judge has dismissed a lawsuit by a man convicted of running a hedge fund scam in Connecticut who claimed New York University owed him a diploma.
Hakan Yalincak (yal-in-SACK’), an NYU undergraduate, was sentenced in 2007 to 3 1/2 years in prison for persuading investors to pour millions into a nonexistent Greenwich-based hedge fund.
His lawsuit against NYU seeks to have F’s in biology and algebra raised to passing grades so he’ll have enough credits to graduate.
On Wall Street – A Connecticut bill that would have imposed transparency and licensing requirements on hedge funds failed to be signed into law Wednesday when the state house of representatives ran out of time to vote on the measure.
The legislature’s special sessions will now focus on the state budget and, therefore, will not be able to address the proposed legislation.
“We’ll have to bring it up again next year,” Ryan Barry, co-chairman of the state house’s joint banks committee and the main supporter of the bill, told Dow Jones.
West Palm Beach (HedgeCo.net) – NorthPoint Trading Partners, LLC has opened a new office in Chicago, IL., with 12 year industry veteran, Michael Ferro, as head. Ferro has held positions at Genworth Financial, Knight Capital Markets, and X-Change Financial Access. He is experienced in both the trading and operations aspects of the buy and sell side, the company said.
“As we continue to expand our presence nationwide, we are very fortunate to have someone with Michael’s talent and experience join our team,” says Douglas Nelson, Chief Executive Officer of NorthPoint Trading Partners, LLC. Atlanta based NorthPoint opened also opened an office in Connecticut earlier in the year.
NorthPoint is an institutional brokerage and fund services company working with small and medium sized hedge funds.
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Stamford Advocate – Although it had bipartisan support, a bill requiring hedge funds operating in Connecticut to disclose conflicts of interest to investors died in the House of Representatives Wednesday, the final day of the 2009 legislative session.
"It ‘blew up’ like Amaranth, like Bayou," said state Rep. Ryan Barry, D-Manchester, who co-sponsored the proposal with Sen. Bob Duff, D-Norwalk, co-sponsored the legislation.
Barry was referring to the high-profile collapses of the Stamford-based Bayou Group LLC in 2005 and Greenwich-based Amaranth Advisors LLC in 2006, which inspired him and Duff, as Banks Committee chairmen, to pursue hedge fund regulations.
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.
Sky News – A US town has edged closer towards clawing back its losses to Wall Street swindler Bernard Madoff, securing a court order for £17m in assets.
The town of Fairfield in Connecticut suffered losses of about £28m from its pension fund to what has been called the biggest Ponzi scam in history.
Some 1,500 members who are trying to recover retirement money were granted the order to chase the assets from Madoff’s relatives and business partners.
Marketwatch – When the $9.2 billion Connecticut hedge fund Amaranth Advisors collapsed in 2006, securities attorneys jumped all over each other to express gleefully how the markets absorbed such a mega-fund failure.
In fact, the markets did soak up the implosion fairly well.
However, two and a half years later, policymakers aren’t so sure the volatile and fragile markets of 2009 could handle another mega-hedge fund collapse.
Times Online – Fairfield Greenwich, the hedge fund manager founded by socialite Walter Noel, became the first fund that invested with disgraced fund manager Bernard Madoff to be charged with fraud.
William Galvin, Massachusett’s Secretary of State, today accused the Connecticut-based fund of lying to investors about it due diligence it did on Madoff’s fund management business.
Fairfield Greenwich was one of the biggest feeder funds to Madoff, enabling the 70-year-old convicted swindler to rip off thousands of people in a $65 billion Ponzi scheme running for at least 20 years.
Bloomberg – Finding a parking spot for your Mercedes or BMW on Greenwich Avenue, the main shopping strip of the U.S. hedge-fund capital, used to be a challenge. Not anymore.
With the recession hammering retail sales, empty curbside spaces abound along the suburban Connecticut thoroughfare, known as the Rodeo Drive of the northeast, and “For Rent” signs decorate vacant storefronts. Ann Taylor, Banana Republic and Borders have all closed their Greenwich Avenue locations.
As banks and hedge funds cut jobs or close down in the worst financial crisis since the 1930s, Greenwich merchants are suffering sales declines. Some stores are simply packing it in. Many are renegotiating rents, cutting inventory or offering cheaper products.
Insurance giant Aviva could end the practice of lending shares to hedge funds in a move against short-selling.
Aviva shares were battered on the stock market earlier this month – losing 40pc of their value in two days – amid claims that short-sellers were looking to make quick profits by driving down the company’s share price.
Now Aviva directors are said to favour bringing to an end the company’s involvement in lending shares from its own investment portfolio to hedge funds.
Bizjournals.com – After watching Sonesta International Hotels Corp. lose roughly 70 percent of its stock market value over the past 18 months, a Connecticut hedge fund has shed roughly a third of its holdings in the Massachusetts-based hotel operator.
In a recent regulatory filing, Mercury Real Estate Advisors, based in Greenwich, Conn., said it sold around 23,400 shares of Sonesta stock (Nasdaq: SNSTA) between Jan. 20 and Feb. 10, bringing its total ownership in the company to 206,048 shares. Those holdings equate to around 5.6 percent of Sonesta’s common stock outstanding.
Mercury’s ownership stake was more than 9 percent in mid 2007, when Sonesta’s stock traded above $30 a share. Sonesta’s stock opened Monday at $9.50 a share.
New York (HedgeCo.Net) – A year-long probe launched by a U.S. Senate Committee has discovered that numerous Wall Street banks have assisted offshore hedge funds in evading millions of dollars in U.S. taxes. The Permanent Subcommittee on Investigations has concluded that Lehman Brothers, Morgan Stanley, Merrill Lynch, UBS, Citigroup and Deutsche Bank created products to skirt a law that required them to withhold the 30 percent tax on stock dividends paid to offshore investors.
While the IRS apparently turned a blind eye, the actions taken by the bank allowed these funds to sell their shares to the bank while entering into a swap contract that paid a fee to the banks in exchange for the amount of the dividend plus any gains.
"Major financial institutions have devised complex financial structures to enable their offshore clients to dodge U.S. dividend taxes," Democratic Senator Carl Levin of Michigan said in a statement Wednesday. "We need legislation to take these abusive tax-avoidance gimmicks off the market, and we need to end the silence and inaction of the Treasury and IRS in the face of rampant dividend tax dodging."
Levin went on to say, ““We are going to press the IRS to go after what is obviously a scheme.” “The IRS should be going after this. They are not.”
The Committee found that Lehman Brothers clients were able to avoid about $115 million in taxes in 2004, while total losses to U.S. revenue are estimated to be around $100 billion a year. These dividend-enhancement products earned UBS about $5 million in 2005 and $4 million for Deutsche Bank in 2007, according to the report. Morgan Stanley also raked in $25 million in revenue from the products in 2004.
"We believe we acted in good faith when we advised our clients and believe we acted appropriately under existing tax law," said William Halldin, spokesman for Merrill Lynch.
IRS spokesman Frank Keith came to the defense, stating, “The IRS intends to aggressive pursue transactions that it believes to be abusive.”
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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