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.
Bloomberg – Former Bear Stearns Cos. hedge fund manager Ralph Cioffi, indicted for an alleged fraud that helped bring down the securities firm, attempted to use his $2 million redemption from a fund he supervised as collateral for a condominium, U.S. prosecutors said.
Cioffi, 53, also ”rarely” heeded compliance trading measures, the government said in a court filing in Brooklyn, New York, federal court. Cioffi and another former Bear Stearns hedge fund manager, Matthew Tannin, 47, were indicted last year for misleading investors about the health of two hedge funds that failed in July 2007, costing investors $1.6 billion. The implosion helped trigger the credit crunch and the eventual sale of Bear Stearns to JPMorgan Chase & Co.
New York Times – The United States is building criminal cases against more than 150 American clients of UBS as part of a crackdown on tax evasion now made easier by a deal over access to secret account information.
U.S. prosecutors gave their first official confirmation of the initial number of criminal investigations in a filing on Tuesday with a federal court in Fort Lauderdale, Florida. The number of criminal probes is widely expected to mushroom soon, Reuters reported.
In the same court document, the prosecutors requested a sharply reduced prison sentence for ex-UBS banker Bradley Birkenfeld, a key informant in the ongoing U.S. prosecutions of wealthy American clients of UBS.
Bloomberg – Hedge fund manager Mark Bloom pleaded guilty to U.S. charges that he stole at least $20 million from clients and lied to them, and that he helped sell illegal tax shelters while working earlier at BDO Seidman LLP.
Bloom, who lives in New York City, pleaded guilty yesterday in federal court in Manhattan to five charges including securities fraud. He admitted he stole millions from investors in North Hills Fund, an investment partnership with more than $30 million in assets that he managed. He agreed to forfeit as much as $20 million and to cooperate with prosecutors in their continuing investigation.
Birmingham Business Journal – The owner of a Chicago hedge fund charged with helping Tom Petters fund his $3.5 billion alleged Ponzi scheme was denied bail Tuesday, reversing a bail decision last week, according to media reports.
Gregory Bell was sent back to Anoka County Jail, where he’s been held for the past week, the Pioneer Press reported. U.S. District Court Chief Judge Michael Davis made the decision based on prosecutors’ arguments that Bell is a flight risk because he put $15 million into foreign bank accounts last year.
Chicago Tribune – Illinois hedge-fund manager Gregory Bell, who was charged with wire fraud for his role in an alleged Ponzi scheme, was granted $1.5 million bail and required to wear an electronic monitor, a federal judge in Minnesota ruled Wednesday.
Bell, founder of Lancelot Investment Management LLC, was accused Friday by U.S. prosecutors and regulators of feeding client assets to the alleged scheme run by businessman Thomas Petters. Magistrate Judge Jeffrey Keyes, citing Bell’s cooperation with authorities, ordered Bell to put up interest in his home in Highland Park to satisfy the bail.
West Central Tribune – A federal magistrate judge ordered the release on bail Wednesday of an Illinois hedge fund manager who allegedly helped Minnesota businessman Tom Petters orchestrate what prosecutors call a $3.5 billion Ponzi scheme.
Prosecutors tried to persuade U.S. Magistrate Judge Jeffrey Keyes that Gregory Bell should be held without bail because he has no significant ties to Minnesota and has millions of dollars in offshore accounts.
They said he also may have or be able to get citizenship in Russia, which has no extradition treaty with the U.S. Bell was born in Moscow in 1965, emigrated to the U.S. in 1981 and is a naturalized U.S. citizen.
New York Daily News – Park Avenue lawyer Marc Dreier was sentenced to 20 years in prison Monday by a judge who scolded prosecutors for wanting to jail him for as long as Ponzi swindler Bernard Madoff.
"Is the government serious about asking for 145 years?" Manhattan Federal Judge Jed Rakoff asked.
"To me, for the government to ask for 145 years is to demean the sentence Judge [Denny] Chin imposed on Mr. Madoff.
New York Times – The managing director of a collapsed Chicago hedge fund, Lake Shore Asset Management, was indicted by a federal grand jury. Prosecutors say the director, Philip J. Baker, operated a $300 million fraud.
The 27-count indictment was unsealed on Monday, said Patrick J. Fitzgerald, a United States attorney, in a statement on Tuesday. An arrest warrant has been issued for Mr. Baker, but his whereabouts are unknown, Mr. Fitzgerald said.
The Commodity Futures Trading Commission accused Mr. Baker in a civil lawsuit last year of having defrauded at least 700 investors by hiding trading losses. The commission won court orders banning Lake Shore from commodities trading.
Mr. Baker said that Lake Shore had a long history of trading success, though it lost about $38 million from 2002 to 2007, according to the indictment.
North Country Gazette – The brother of the former chief financial officer of the bankrupt hedge fund firm Bayou Group LLC has been sentenced to 21 months in federal prison of his role in concealing a $400 million fraud.
Matthew Marino, brother of Daniel Marino, was also ordered to pay $60 million in restitution.
Prosecutors say that Marino knew about the fraud on the investors in the now-collapsed Bayou Hedge Funds and took steps to conceal it. His brother is serving 20 years for the scheme as is Bayou co-founder Samuel Israel.
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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SmartBrief – Michael Berger, an Austrian banker accused of securities fraud, might go free without facing any charges, Vienna prosecutors said. Berger pleaded guilty to securities fraud in Manhattan, N.Y., in 2000 after the $400 million collapse of his hedge fund, but he became a fugitive in 2002 until his arrest in Austria in 2007.
Wall Street Journal – Prosecutors said $160 million is unaccounted for in a Ponzi scheme allegedly run by hedge-fund manager James Nicholson.
At a bail hearing Thursday, Assistant U.S. Attorney Maria E. Douvas said the government’s investigation showed that $293 million was invested with Mr. Nicholson, who was president and general partner of Westgate Capital Management LLC. Of that, $160 million is unaccounted for, Ms. Douvas said.
Prosecutors had alleged that Mr. Nicholson, of Saddle River, N.J., falsely represented to investors that the firm had assets under management ranging from $600 million to $900 million.
At Thursday’s hearing, U.S. Magistrate Judge Ronald L. Ellis in Manhattan didn’t change the bail conditions set for Mr. Nicholson — a $10 million personal recognition bond, with five co-signers and secured by three pieces of property. He also would be subject to home detention and electronic monitoring.
