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.
Stamford Advocate – Debra Ryan, the girlfriend of Samuel Israel, convicted for his role in a $400 million fraud involving the collapse of Stamford-based hedge-fund firm Bayou Group LLC, was sentenced to three years probation for aiding his escape.
Ryan, a decorator who once rented a house on Highland Avenue in Greenwich, also was ordered to be confined at home for four months and not to have any contact with Israel.
Israel, 49, pleaded guilty in March to faking his suicide by abandoning his car on the Bear Mountain bridge with the words "suicide is painless" written on the windshield and fleeing the day he was to begin a 20-year sentence. He pleaded guilty to fraud in 2005 after admitting he hid $400 million in losses at Bayou.
CNBC – Hedge funds posted their best monthly performance in a decade in May, taking advantage of rallying stock markets and distressed opportunities across the board, according to the latest numbers from the Absolute Return Composite of hedge fund indices.The industry has been increasingly under the microscope by Washington and investors alike since the second half of last year. On top of registering their worst performance ever in 2008, with the average fund down 19 percent for the year, the $50 billion Madoff fraud delivered a severe blow to the already suffering industry and gave rise to a huge wave of redemptions.
But this year has been different. On average, hedge funds gained 3.1 percent over May, bumping up year-to-date gains across the $1.33 trillion industry to about 6.1 percent.
Law.com – Federal prosecutors Thursday unsealed an indictment charging the chief executive of what used to be one of the world’s largest investment funds with constructing elaborate tax shelters for some of his wealthiest clients. The executive, Jeffrey Greenstein, the former head of the Seattle-based fund Quellos Group, and two lawyers face 18 counts related to tax evasion and fraud for a scheme that netted them $86 million in fees and allowed six clients to avoid paying about $400 million in federal taxes, according to the indictment.
What’s interesting for our purposes is that the indictment details how lawyers from Cravath, Swaine & Moore and Bryan Cave blessed the shelters with letters indicating to the taxpayers that they were legal and would withstand scrutiny from the Internal Revenue Service. (The firms are identified as "C.S.M." and "B.C." in the indictment, but two sources familiar with the matter confirm they are Cravath and Bryan Cave. In addition, a 2006 congressional investigation mentioned the role the two firms played in the Quellos tax shelters, and at least one lawyer, Lewis Steinberg, then of Cravath and currently at Linklaters, testified before a congressional subcommittee.)
Greenwich Time – Fairfield Sentry Ltd., seeking to recover more than $919 million in fees related to investments involving Bernard Madoff, sued the Fairfield Greenwich Group hedge fund that lost $7 billion in Madoff’s fraud.
Fairfield Sentry, based in the British Virgin Islands, said in a complaint filed May 29 in New York State Supreme Court in Manhattan that it is the largest victim of the fraud perpetrated by Bernard Madoff.
The fund seeks to recover more than $919 million in investment management and performance fees that it paid to Fairfield Greenwich based on inflated net asset value reports of its investments with Bernard L. Madoff Investment Securities LLC.
Fairfield Greenwich, led by Greenwich resident Walter Noel, claimed it had $16 billion of assets under management, $7.3 billion of which was purportedly in Fairfield Sentry Ltd., according to the complaint.
New York Times – The Ponzi scheme’s victims denounce him as cold-hearted, dishonest and just plain wrong
No, they are not describing Bernard L. Madoff, the author of the fraud that has ruined their lives. They are criticizing Irving H. Picard, the New York lawyer and trustee who has been appointed to represent their interests in the tangled scandal.
As claims flow in from thousands of victims, Mr. Picard and his legal team are quietly making life-shaping decisions every day. They decide who will be paid quickly, who will be paid eventually, who will not be paid at all and who will be asked to pay back money they got years ago.
Reuters – Man Group, the world’s largest listed hedge fund firm, is likely to extend the independent valuation of its flagship AHL strategy to calm investors spooked by Madoff, sources familiar with the matter said.
AHL, a $25 billion (16 billion pounds) family of managed futures funds which bet on trends in global futures markets, currently uses a mixture of internal and external administrators to value its constituent funds, which tend to be in liquid and easier-to-value markets.
However, with investors more focused than ever on independent administration in the wake of the fraud by U.S. financier Bernard Madoff, Man is ready to embrace a greater balance of third party input.
Newsinferno.com – Bernard Madoff trustee, Irving Picard, has sued three Fairfield Greenwich Group hedge funds—Fairfield Sentry Ltd., Greenwich Sentry LP, and Greenwich Sentry Partners LP—in a clawback suit that seeks the return of $3.54 billion to repay victims of Madoff’s historic Ponzi scheme, said Bloomberg News.
Madoff pleaded guilty to 11 fraud counts on March 12. The former chairman of the NASDAQ stock exchange ran an investment advisory business (Bernard L. Madoff Investment Securities LLC, or BLMIS), for decades that was, in reality, a Ponzi scheme. Last November, Madoff told his investors that his fund held more than $64 billion, but in reality, it only held a mere fraction of that amount.
Courthouse News Service – A Beverly Hills man defrauded his family and friends of $44 million by persuading them to invest in his two nearly worthless hedge funds and spent the money on a Malibu Beach home, Porsches, and poker, federal prosecutors say.
Bradley L. Ruderman, 46, quoted as a financial expert by national media, surrendered on Friday after being named in a criminal complaint charging him with fraud.
Siliconindia.com – An Indian-American investment adviser has been sentenced to 10 years in prison following his conviction on 20 counts of fraud with a scheme that bilked 15 investors of $12.5 million.
Amit Mathur, 38, of Shrewsbury, Massachusetts, was also ordered to pay restitution to his victims by the federal District Court in Worcester, the Boston office of Federal Bureau of Investigation (FBI) said in a release.
A hedge fund fraud that involved a pair of funds claiming to hold more than $800 million in assets has been halted, according to the US Securities and Exchange Commission.
In a statement, the regulatory body said the two funds lost money and contain less than $1 million.
Bradley Ruderman is alleged to have raised more than $38 million from investors via the two hedge funds, Ruderman Capital Partners and Ruderman Capital Partners A.
He is accused of falsely claiming that the investment vehicles held positions in established securities such as Wal-Mart Stores, Apple and Microsoft, as well as stating prominent people were investors in his funds, when they were not.
Reuters – U.S. securities regulators have about 150 active hedge fund investigations and more than 50 probes involving credit default swaps and other derivatives, Securities and Exchange Commission Chairman Mary Schapiro said on Monday.
The SEC also has about two dozen active municipal securities investigations, possibly involving arbitrage-driven fraud, public corruption and price transparency, Schapiro told a conference of business journalists in Denver.
Bloomberg – Hedge fund investors’ growing demands for separate accounts may be an overreaction to increasing redemptions and fraud, participants said at an industry conference in Hong Kong this week.
Investors are demanding accounts that allow them to tailor investments, see trades and get out when they want, instead of the traditional way of pooling their money in a fund, as managers try to curb redemptions and after U.S. financier Bernard Madoff’s conviction for running a Ponzi scheme.
A record $155 billion was pulled from hedge funds last year, according to Chicago-based Hedge Fund Research Inc., while capital outflow may accelerate to $168 billion this year, a Deutsche Bank AG survey in March showed.
