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.
HedgeCo.net (West Palm Beach) – ‘Hedge fund operator’ Rod Stringer has pleaded guilty to money laundering in a $14 million Ponzi scheme, federal prosecutors say.
He allegedly took money from 44 victims over 8 years, claiming to be "a day trader and hedge fund operator, although he was not a licensed securities broker," the U.S. Attorney’s Office said.
According to the Securities and Exchange Commission, Stringer doled out about half the money from the phoney Texas hedge fund to some victims, but kept $6.9 million for himself.
"He solicited and enticed individuals to invest money with him by making false representations and promises, such as: the return on investors’ money would be approximately 50% profit; he was a day trader and had a foolproof system; the return on investors’ money would be better than a savings account; the accounts were liquid and investors could withdraw their money anytime; and he had several computers that watched the trend line of stocks automatically and advised him when he should move money in and out of the market," a written statement from prosecutors said.
Stringer faces up to 10 years in prison, a $250,000 fine and restitution. The plea agreement calls for Stringer to forfeit more than $1.5 million, according to Courthouse News Service.
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West Palm Beach (HedgeCo.net) – Two new legislations were introduced in Bermuda January 1, requiring regulated financial institutions to comply with various obligations under the recently updated legislative framework, according to Cayman Islands law firm Conyers Dill & Pearman.
The firm said that the updated legislation defines ‘Financial Institutions’ as persons who, among other things, carry on the business of a ‘fund administrator’, or are ‘operators’ of investment funds.
The BMA expects Financial Institutions, under its supervision, to address their management of the relevant risks in a thoughtful and considered way, and to establish and maintain systems and procedures which are appropriate and proportionate to the risks identified.
Investment fund operators and fund administrators are required to appoint a Money Laundering Reporting Officer (“Reporting Officer”) to whom reports should be made and who shall have responsibility to make reports when suspicious circumstances require.
It is a requirement for “non-licensed persons” to register with the BMA by 30 June 2009 using the BMA’s prescribed form and paying the relevant fee. Failure to comply will result in their inability to carry on business activities, the firm said.
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New York (HedgeCo.Net) – A former Florida hedge fund manager is being held without bail in a West Palm Beach prison after prosecutors convinced the judge he is a flight risk.
Attorneys for Won-Sok Lee were seeking a continuance for his arraignment on Friday so that he could find a local lawyer.
Lee and his company, The KL Group, were accused of swindling over $200 million out of investors through their hedge funds back in 2006. He was arrested in February after trying to board a plane from Seoul to Argentina after spending three years on the run.
Lee and his brothers, who are currently serving lengthy prison terms, ran hedge funds out of locations in Florida and Nevada from 2000 to 2005.
Lee is facing dozens of charges, including conspiracy, money laundering, and mail and wire fraud. His next hearing is scheduled for April 17.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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New York (HedgeCo.Net) – Won Sok Lee will face a U.S. trial after fleeing for three years following the discovery of his bogus Florida hedge fund. The KL Group allegedly defrauded about $200 million out of investors over the course of five years. Lee appeared for the first time in a West Palm Beach, Florida court on Friday since his indictment in 2006.
Lee has been hit with dozens of charges including money laundering, mail fraud, conspiracy and wire fraud.
“Almost from its inception, the main fund suffered losses in each and every quarter of its existence,” said prosecutors.
Still, the fund managed to raise almost $200 million from 2000 to 2005. Lee, along with his brothers Jung Bae Kim and Yung Bae Kim, ran these hedge funds from locations in Florida and Nevada. The SEC caught wind of the suspicious activity in 2005, when they seized the company and appointed a receiver. Assets recovered only totaled $6.6 million, with only a portion of that amount actually returned to the investors.
Lee’s brothers were both sentenced to hefty terms. Jung Bae will serve 18 years while Yung Bae was sentenced to six years.
Lee was seized in February at an airport in Seoul after trying to board a flight to Argentina. Though his bail hearing is set for next Friday, prosecutors are trying to convey the fact that he is still a flight risk.
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. www.hedgefundlounge.com, www.hedgefundtools.com, and www.hedgefundemployment.com
New York (HedgeCo.Net) – Texas Resident George D. Hudgins must pay $71 million following a federal court order obtained by the CFTC, to pay back victims of his Ponzi scheme and to settle a $15 million penalty.
According to the original complaint, Hudgins swindled about $88 million from June 2001 to May 2008, in a commodity pool operation that was supposed to trade futures and options. Hudgins told investors that his fund was reaping returns of up to 99 percent annually, when in reality, the pool had experienced a net loss since its inception in December 2003, and had lost a total of about $28 million.
In typical Ponzi scheme fashion, Hudgins used about $17 million from the pool to pay “returns” to existing investors and keep up the façade. In addition, he doctored the account statements to reflect a stellar performance. Other funds from the pool were withdrawn by Hudgins to pay for his extravagant lifestyle, which included Tiffany jewelry, antique sports cars, real estate and a plane.
When a judge froze the assets of Hudgins and appointed a receiver to distribute the funds, only $24 million was collected.
Last September, Hudgins pleaded guilty to wire fraud, money laundering and embezzlement. He was sentenced last month to serve 121 months in a federal prison.
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. www.hedgefundlounge.com, www.hedgefundtools.com, and www.hedgefundemployment.com
BusinessWeek – A prominent Manhattan lawyer accused of peddling $700 million in phony securities to hedge funds will likely forgo a trial and change his plea to guilty, his attorney told a judge Thursday.
The defense announcement came at a hearing at which Marc Dreier pleaded not guilty to a revised indictment accusing him of money laundering in addition to previous charges of securities fraud, wire fraud and conspiracy to commit those crimes.
Hedge Week.com – Pacific Alternative Asset Management Company, an Irvine, California-based fund of hedge funds manager with USD9bn in assets has announced the recruitment of the investment team of KBC Alpha Asset Management, a USD700 million Asia-focused fund of hedge funds manager.
KBC Alpha was established in 2001 by chief investment officer Neale Safaty as the fund of hedge funds division of KBC Alternative Investment Management. The fund investment team will be integrated into Paamco’s global portfolio management team and will initially operate as a separate division within the firm known as Pan Asia Alpha Strategies.
