A federal judge in Miami has found that former hedge fund manager Michael Lauer defrauded investors out of more than $500 million between 1999 and 2002.

U.S. District Court Judge Kenneth A. Marra, in a 67-page order issued last week, found that Lauer manipulated the prices of seven securities that were a large part of the funds’ portfolios, but failed to provide any basis for the exorbitant valuations and lied to investors about the hedge funds actual holdings.

The judge said in his order that Lauer’s actions, as head of Lancer Management Group and Lancer Management Group II, were "egregious, pervasive, premeditated and resulted in the loss of hundreds of millions of dollars in investors’ funds."

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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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Wall Street Journal- A federal judge said the Securities and Exchange Commission didn’t prove that former Knight Equity Markets chief Kenneth Pasternak defrauded the firm’s clients.

In an oral opinion Thursday, U.S. District Court Judge Joel Pisano said that witness testimony, including testimony by former customers of Knight, and trade records "undermined" the SEC’s theory of the case. "I conclude there is no evidence of any misconduct committed by Mr. Pasternak," the judge said after a 14-day bench trial in federal court in Trenton, N.J.

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