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) – A former UBS AG executive has been sentenced to 6-1/2 years in prison after pleading guilty to selling private information about the bank’s stock recommendations. Mitchel Guttenberg, a former manager in UBS’ equity research department, was accused by the prosecution of running the most pervasive insider trading rings since the 1980’s.
“From the moment he joined the investment review committee he planned to give that information to others to use illegally,” Judge Deborah Batts of U.S. District Court in Manhattan said yesterday.
Guttenberg didn’t try to deny the allegations and instead plead guilty to two counts of conspiracy and four counts of securities fraud. He admitted that on numerous occasions he tipped off two traders about analyst stock recommendations along with dispersing information about UBS analysts’ upgrades and downgrades that were used to net more than $17.5 million over hundreds of transactions.
Guttenberg was one of a dozen people charged with orchestrating the insider trading ring. Other employees came from such companies as Morgan Stanley, Bank of America and Bear Stearns. His sentence includes three years of supervision following his incarceration at a minimum security prison in New Jersey.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
New York (HedgeCo.Net) – Hamilton Alan Bird, formerly of XL Capital Partners, who headed the scheme that swindled over $7.5 million of investors’ money, has been sentenced to 24 years in prison. The Colorado Springs resident received his fate on Friday, six months after pleading guilty to one count of securities fraud and another count of theft.
According to the original indictment, Bird, along with partners David Edward Newton and Douglas Alan Scott, took money from about 350 individuals and set up their own “personal piggy bank.” From October 2002 to December 2004, the three men withdrew millions of dollars for personal usages including residences and private jets.
While Bird’s felonies only carried a maximum sentence of 12 years, he was eligible to be charged as a habitual criminal, meaning that his sentence could have been three times his maximum.
Newton, in exchange for testifying against Bird and Scott, was sentenced to 15 years probation and 200 hours of community service. Scott, a former Pastor for the now collapsed River of Life Church, was sentenced to 15 years probation and ordered to pay back $1.4 million in restitution.
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. For more information, visit www.hedgeconetworks.com
New York (HedgeCo.Net) – A published author and notable hedge fund manager has seen his charade finally come to a halt. Mark Boucher of Portola Valley, California, who wrote “The Hedge Fund Edge,” has agreed to pay $100,000 in penalties after misleading investors in a $20 million real estate scam. In addition to the monetary penalties, he is barred from acting as an investment advisor for the next five years.
According to reports by the SEC, Boucher pushed two investments supposedly backed by real estate onto his investors via his monthly newsletter, garnering around $20 million from 1999 to 2005. The two companies, however, had little to do with the real estate sector. One company had no property in its portfolio, while the other company owned a single property that was mired in debt. Neither firm was known for successfully developing any real estate.
The money was apparently going to Gary P. Johnson and John Brake, owners of the two companies. The pool of investor money afforded the three men their own home mortgages, luxury cars and start up capital for other business ventures. Johnson agreed to return $1.8 million from commissions he received, as well as pay over $820,000 in penalties and interest, all while denying the allegations brought against him. Brake, who has also been accused of securities fraud, has not reached a settlement yet with the SEC.
"Boucher lured clients into these fraudulent real estate deals by exploiting his reputation as a successful hedge fund manager," stated Marc Fagel, Director of the SEC’s San Francisco regional office. "Johnson and Brake failed to develop the projects, instead diverting millions of dollars of investor money to finance their lavish lifestyles."
An editorial review of his book states, “The Hedge Fund Edge melds market timing, vehicle selection, risk management techniques, economic insight and understanding, and tactical asset allocation into a totally new philosophy and approach that has been proven to produce spectacular gains with relatively low risk.”
Clearly, that formula needs to be reworked.
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. For more information, visit www.hedgeconetworks.com
Reuters – U.S. federal prosecutors asked securities regulators to delay a civil case against two former Bear Stearns hedge fund managers while they hold grand jury hearings in building a criminal case against the pair.
Fund managers Ralph Cioffi and Matthew Tannin were arrested and indicted in June, the first executives to face federal criminal charges in fallout from the subprime mortgage crisis. Both pleaded not guilty. A trial date has not yet been set.
The Securities and Exchange Commission had also begun civil securities fraud charges against Cioffi and Tannin, accusing them of misrepresenting the investments of two funds they oversaw.
A memorandum filed on Wednesday by U.S. Attorney Benton Campbell in the U.S. District Court in Brooklyn asked for a stay in the civil case until the conclusion of the criminal case.
"A stay is necessary in the civil case to preserve the secrecy of the ongoing grand jury proceedings," the memorandum said.
The document said the SEC was consulted and took no position on the stay, and that the defendants had declined to comment on the request.
Reuters- Veteran U.S. lawyer Brendan Sullivan is joining the defense team of indicted former Bear Stearns hedge fund manager Ralph Cioffi, a person close to the matter said on Tuesday.
Sullivan, a trial attorney who has represented high-profile clients including Iran-Contra figure Oliver North, will be an addition to Cioffi’s existing defense team, said the person, who spoke on condition of anonymity.
Cioffi and another former Bear Stearns portfolio manager, Matthew Tannin, were charged in June with conspiracy and securities fraud related to last year’s collapse of two hedge funds linked to risky mortgage investments.
New York (HedgeCo.Net) – Bear Stearns has triumphed in a case involving disgruntled investors seeking $141 million for the losses they incurred following the collapse of the Manhattan Investment Fund Ltd., a hedge fund where Bear served as the prime broker.
The fund, which filed for Bankruptcy in 2000, started experiencing losses almost immediately after its launch in 1995. After shorting technology stocks to no avail, fund manager Michael Berger issued false documentation showing profits and gains and ultimately collected $575 million from investors. Berger pleaded guilty in 2000 to securities fraud.
The suit against Bear Stearns was an attempt to hold hedge funds’ prime brokers responsible for investigating fraudulent clients. However, it was ruled that Bear Stearns had acted in good faith. The eight person jury in Manhattan concluded on June 27th that Bear was not liable for failing to see the discrepancies in the hedge fund’s books.
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. For more information, visit www.hedgeconetworks.com
New York (HedgeCo.Net) – The two managers behind Bear Stearns’ infamous failed hedge funds have surrendered to face charges, in what will be the first criminal lawsuit stemming from the subprime mortgage fallout.
Ralph Cioffi, 52, and Matthew Tannin, 46, are part of an indictment resulting from a yearlong federal securities fraud investigation, according to a law enforcement official who spoke to The Associated Press.
Although Tannin’s lawyer is quick to pronounce his innocence, the two men are accused of misleading investors about market conditions and the risks associated with the Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Master Fund and the High-Grade Structured Credit Strategies Master Fund.
Using heavy leverage, the funds invested in subprime-mortgage backed securities that started to plummet in value amidst the record number of foreclosures. The managers are accused of hiding performance information as the fund started to lose value rapidly, even citing it as “positive” at specific low points.
After a $1.6 billion failed rescue attempt by Bear Stearns, the funds were shut down in June 2007, leaving investors with nothing more than an apology.
This isn’t the first time Cioffi and Tannin have been hit with allegations. After the implosion of the funds, Barclays Bank, backed by other investors sued Bear Stearns, claiming they were misled about the funds as well.
Susan Brune, Tannin’s lawyer states, "He is being made a scapegoat for a widespread market crisis. He looks forward to his acquittal."
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. For more information, visit www.hedgeconetworks.com
New York (HedgeCo.Net) – Troubles keep arising for Bear Stearns, even after its demise and the resulting takeover by JPMorgan Chase. It seems investors are still targeting Bear after the implosion of their two failed hedge funds last year that kicked off the subprime mortgage crisis.
Federal prosecutors, along with the SEC, may bring criminal charges against Ralph Cioffi and Matthew Tannin, who ran the High-Grade Structured Credit Strategies Enhanced Leverage Master Fund and the High-Grade Structured Credit Strategies Master Fund.
The two funds at one point managed upwards of $20 billion, with a majority of their assets invested in subprime-mortgage backed securities. As homeowners started defaulted on their mortgages at record rates, these securities plummeted in value, and creditors started to demand more collateral.
Even an influx of $1.6 billion by Bear Stearns could not save the funds, and assets were subsequently frozen. Both funds eventually filed for bankruptcy with only a small portion remaining of investor’s money.
A failed request at a Cayman Islands liquidation sealed the deal for Bear, who no longer could shield the fund’s assets from investors.
The question arises of whether or not Bear Stearns overstated their securities values to shareholders. At times, the two managers were quoted as reporting the performance of the funds as “positive,” when in reality, it was down as much as 38%.
According to the Wall Street Journal, securities fraud charges may be filed against the two men by next week.
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. For more information, visit www.hedgeconetworks.com
West Palm Beach (Hedge Co.Net)- Kirk Sean Wright, CEO of hedge fund International Management Associates of Atlanta hanged himself in a Union City jail cell Saturday night.
Wright was convicted by a federal jury on 47 counts of mail fraud, securities fraud and money laundering, stemming from a scam run through his hedge fund, International Management Associates. He collected between $115 million and $185 million for his hedge fund from at least 500 investors since 1997.
The FBI in association with the IRS, DOJ and SEC investigated why requests by current and former NFL players for their funds were ignored.
Wright maintained his innocence until the end, contending that simple mis-management was to blame for his investors’ losses.
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. For more information, visit www.hedgeconetworks.com
Reuters – A federal jury in Atlanta on Wednesday convicted former hedge fund manager Kirk Wright on charges of scamming investors, including former professional athletes, out of $150 million, the Justice Department said.
Kirk was found guilty on charges of mail fraud, securities fraud and money laundering relating to the 2006 collapse of his Atlanta-based investment firm, International Management Associates (IMA), the Justice Department said.
IMA also had offices in New York, Los Angeles and Las Vegas and thousands of clients. Evidence presented in his two-week trial showed Wright had been lying to investors since 2001 about investment performance and their account balances, the Justice Department said.
The government presented as evidence fabricated records and material showing he diverted investors’ money for personal use, including cash for himself and family members, luxury cars, jewelry, house renovations and a $500,000 wedding.
IMA collapsed in 2006, after several investors requested distribution, received bad checks and filed lawsuits. The investor group included several former National Football League players who were among victims who testified at the trial.
"A measure of justice was served today for the hundreds of investor-victims in the stunning collapse of International Management Associates," U.S. Attorney David Nahmias said. "Those victims poured more than $150 million into Wright’s hedge funds over the years, only to find in 2006 that the money was gone and that Wright had lied to them for years."
Wright could receive a sentence of up to 710 years in prison, a fine of up to $16 million and restitution for victims’ loses. He remains in custody and is scheduled for sentencing on Aug. 26.
