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.
New York (HedgeCo.Net) – The Obama administration is considering a deal in which they would forgive part of the $13.4 billion owed to them from General Motors Corp. in exchange for an equity stake in the company, according to a report by Bloomberg News who citing people familiar with the matter.
The deal comes as GM approaches their June 1 deadline to show they can become viable, the sources said.
GM is already considering breaking up the company into a sector comprised of only the profitable parts, such as Chevrolet and Cadillac, while the non-profitable entities, such as Hummer, can be liquidated.
GM still has major debt obligations to its bondholders, who are owed about $27.5 billion. The company also owes its health care fund about $20 billion. Retirees who are entitled to health care benefits would most likely get more equity in the new entity than the bondholders.
Bondholders previously opposed a plan by GM that would give them 90 percent equity in the newly restructured company, though that would have required them to swap most of their stake at the time.
President Obama has been vocal in his belief that bankruptcy is the best option for GM, though new CEO Fritz Henderson is doing everything he can to avoid that scenario. GM continues to work with the U.S. Treasury and the Obama administration in hopes of achieving a new, reorganized business model.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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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) – Wealthy Americans who have been hoarding cash overseas and failing to pay Uncle Sam are getting a break, as the Internal Revenue Service unveils a plan that will greatly reduce their penalties.
The idea comes a month after UBS was charged with helping thousands of American clients hide over $15 billion in secret Swiss bank accounts. The IRS is forcing the bank to disclose the names associated with 52,000 offshore accounts, something that UBS is trying desperately to contest in order to salvage their U.S. clientele base.
Should these individuals come forward prior to this release of names, the IRS is offering a reduced penalty of up to 20 percent for not filing a Report of Foreign Bank and Financial Accounts, also known as an Fbar. However, the clients must be proactive. Should they not come forward and their names eventually be disclosed, they not only face a penalty equal to 50 percent of the balance of each account, but other fines and possible jail time as well.
"This is a chance for people to come clean on their own," IRS Commissioner Doug Shulman explained.
The IRS will still require the individuals to pay any back taxes owed over the last six years as well as any applicable fees. It is estimated that the U.S. loses $100 billion a year in lost tax revenue from offshore activity.
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) – Peter Madoff, brother of convicted Ponzi schemer Bernard Madoff, had his assets temporarily frozen by a New York State Judge yesterday. The Chief Compliance Officer of Bernard L. Madoff Investment Securities LLC was sued by an investor who lost almost half a million dollars in the master fraud committed by his brother.
The plaintiff, Andrew Samuels, entrusted Peter Madoff with an inheritance of $470,000 in which Peter, who was the sole trustee from 2003 to 2008, took and invested with his brother. When the scam collapsed and Samuels realized all of his money was gone, he contested that Peter breached his fiduciary duty.
New York State Supreme Court Justice Stephen A. Bucaria froze the assets until the next hearing on April 3rd.
Despite the massive $50 billion fraud that Bernard Madoff masterminded for decades, no other employees of the firm or subsidiaries have been charged with any wrongdoing.
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) – Hedge fund assets, which were once estimated to reach almost $3 trillion, finished the year at around $1.8 trillion, according to research conducted by London-based HedgeFund Intelligence.
The report contends the fall in assets happened almost entirely in the second half of 2008, as markets took a beating and many hedge funds were forced to close shop. In addition, hedge fund firms that manage $1 billion or more fell from 395 in mid-2008 to 311 at year’s end. Also contributing to the fall was the fact that new fund launches didn’t come close to filling the void left by failed funds. While just 55 new funds were launched last year in the United States with assets of $50 million or more, 200 hedge funds were shut down or liquidated.
Hedge funds as a whole posted their worst year to date in 2008, with the average fund losing about 19 percent, according to data compiled by Chicago-based Hedge Fund Research. The firm also reported hedge funds are already experiencing a better year, with the average fund gaining 0.39 percent in January and falling a mere 0.51 in February, though still outperforming the stock market.
HedgeFund Intelligence predicts that assets may drop another 20 percent or more in the coming months, before leveling off sometime during this year.
According to their data, Bridgewater Associates is the largest hedge fund based on assets under management, with $38.6 billion. Coming in second, JP Morgan manages $32.9 billion, while John Paulson’s Paulson & Co. slid into third place with $29 billion in assets under management.
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) – Australian regulators have extended the ban on short-selling, saying the move was in the “national interest” of the country.
As large national banks prepare to release their profits in the wake of more write-downs and rising debt, regulators wanted to avoid the effects that short-selling by aggressive hedge funds would have on the market.
"We welcome any additional steps that further boost stability in these difficult conditions," said Senator Nick Sherry. "This is a decision made firmly in the national interest and regardless of any sectoral interests."
The Alternative Investment Management Association was disappointed with the decision, saying the ban reduces liquidity in the market. Both the Federal Government and the Australian Bankers Association agreed with the extension of the ban, while others disagree with the reasons outlined by the regulators.
The Australian Securities and Investment Commission said they would “not hesitate to act” should it be discovered that individuals or companies were skirting the ban.
The ASIC originally enacted the ban last September amidst the market collapse and crumbling financial institutions. The United States and Great Britain enacted bans on short-selling as well, which were lifted shortly thereafter.
The Australian government said they are hoping to lift the ban eventually, after the completion of their new short-selling disclosure requirements.
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) – While authorities are trying to locate and freeze all of the assets of admitted Ponzi schemer Bernard Madoff, lawyers representing his wife, Ruth, claim that she has millions in assets, all independent of her husband’s scam.
In an order filed yesterday, it was disclosed that Ruth Madoff owns $45 million in municipal bonds, and a New York City apartment. Ruth also apparently isn’t facing any liquidity crunch; she has $17 million in cash sitting in a Wachovia bank account.
U.S. District Judge Louis Stanton wrote that “some of the assets covered by the relief order are unrelated to the alleged Madoff fraud and only Ruth Madoff has a beneficial ownership in these assets.”
Earlier last month, Bernard Madoff agreed to a permanent freeze on his assets, without admitting or denying fraud charges.
Mr. Madoff has contested that he worked alone, however doubts surfaced when Mrs. Madoff withdrew $15.5 million from a brokerage account in her name in the weeks leading up to her husband’s arrest. The account was with Cohmad Securities Corp., an entity part owned by her husband.
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) – Hedge fund manager William Ackman of Pershing Square Capital Management is in talks with discount retailer Target to nominate some potential members to their board of directors, according to a recent Securities and Exchange Commission filing.
The hedge fund currently holds a 9.7 percent stake in the Minneapolis-based company, but has been vocal about its disappointment relating to plummeting share prices and lagging sales.
Earlier this week, Target confirmed their fourth-quarter profit fell 41 percent. Shares closed at $27.82 yesterday, a 50 percent tumble since its peak last September.
Ackman did not state how many board members he wished to nominate, or who they were. He also said he may decide to up or reduce his stake in the company, although he still believes there is plenty of potential in the retailer.
Ackman made a bold move earlier this year, when he allowed investors to withdraw as much of their capital as they liked in his Pershing Square IV Fund. The fund, which was heavily invested in Target, plunged 90 percent this year, prompting an apology to investors and a green light to clear their cash out. Ackman contributed $25 million of his personal funds to help pay back clients of the fund.
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) – Idaho Falls resident Daren L. Palmer has been charged with operating a $40 million Ponzi scheme through his unregistered company, Trigon Group, according to the Commodity Futures Trading Commission.
Palmer is being charged with solicitation fraud and misappropriation of pool funds after it was discovered he used client funds for personal expenses and failed to register with the CFTC as a commodity pool operator.
According to the complaint, Palmer allegedly bilked $40 million from investors since at least September 2000, by promising returns of 7 percent monthly and 20 percent annually. From that $40 million, he only placed $4.5 million in his trading accounts.
“This is another unfortunate example of the maxim, ‘If it appears too good to be true, it probably is,’ said Stephen J. Obie, Acting Director of the CFTC.
Palmer fraudulently claimed he was a successful futures trader and that his pool had a successful track record. Palmer doctored false account statements as a means to keep up the appearance. He later admitted to using new capital coming in to pay off older investors, in a typical Ponzi scheme fashion.
Palmer withdrew about $25,000 to $35,000 per month and used the money to pay off credit card debt, build a new home, and purchase snowmobiles. Palmer’s next hearing is scheduled for April 23rd.
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) – Misha Malyshev, a trader for Citadel Investment Group who headed two of the firm’s hedge funds, has resigned according to a report by Bloomberg News.
Malyshev seemingly had a successful run with Citadel, working for the firm for 6 years and helping the two hedge funds post returns of about 40 percent last year. The hedge funds are estimated to manage about $2 billion in capital.
Malyshev used “high-frequency” trading, which is a computer-dependent strategy that aims to exploit hidden behavior trends in the market, to run the funds. As opposed to real-time data analysis, high-frequency trading uses tick data to uncover information and trends that may be invisible to the average analyst. Complex algorithms and PhD’s are usually standard with this method of trading.
According to the report, Malyshev will take some time off and is unlikely to start working for another fund within the next 18 months, because of contractual obligations.
Citadel, which is run by Kenneth Griffin, seems to be on the up and up this year after a disappointing 2008. Griffin has informed investors that they will be able to make withdrawals from the firm’s biggest funds, Kensington and Wellington. The two funds were frozen last year after losing over half of their value.
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) – UBS AG will pay $200 million to settle the SEC charges that the Swiss Bank acted as an unregistered broker-dealer and investment adviser.
According to the original compliant, UBS helped certain U.S. individuals to set up and maintain undisclosed Swiss bank accounts, which enabled these clients to evade U.S. taxes. In addition, UBS acted as an unregistered broker-dealer and investment adviser from 1999 to 2008, to thousands of U.S. clients while holding billions of dollars in assets for them. UBS allegedly raked in profits of up to $140 million a year from this business.
“UBS avoided compliance with U.S. securities laws for many years, at the same time they were engaged in other illegal conduct, which makes this one of the most egregious cases of its kind," said Scott W. Friestad, Deputy Director of the SEC’s Division of Enforcement in a recent press release.
The SEC alleges that UBS was fully aware that it was required to register with their agency. They believed that UBS lured clients by sending them to exclusive events such as art shows, yacht outings and sporting events, all sponsored by the bank. In addition, client advisors who traveled abroad to the U.S. were given encrypted laptops and were trained on how to avoid detection by authorities.
In addition to the $200 million fine, UBS will settle criminal charges with the Department of Justice in which they will pay an addition fine of $180 million, and another $400 million in tax-related payments.
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
