New York (HedgeCo.Net) – Three former executives of hedge fund New Stream Capital pleaded guilty in U.S. District Court in New Haven to a federal conspiracy charges, according to the U.S. attorney for Connecticut.

David Bryson, Bart Kutekunst, and Richard Pereira were accused by the SEC of secretly revising the fund’s capital structure before it collapsed in order to placate its largest investor, Gottex Fund Management. Bryson and Gutekunst then directed New Stream’s marketing department to continue marketing the hedge fund as though all investors were on the same footing when in fact Gottex had priority over other fund investors in the event of the fund’s liquidation.

Bryson, Gutekunst and Pereira each pleaded guilty to one count of conspiracy to commit wire fraud, a charge that carries a maximum prison term of five years, according to the release.

Under the scheme, New Stream launched new feeder funds, one based in the United States and a series of funds based in the Cayman Islands, according to court documents and statements made in court, in November 2007. New Stream also announced that its existing Bermuda Fund would be closing, and all foreign investors would have to move their investments into the Cayman Fund, according to the release.

“Rather than transfer into the new structure, New Stream’s largest investor placed a redemption on its whole investment in the Bermuda Fund in March 2008,” representatives said in the release. “At risk of losing their largest investor, Bryson, Gutekunst and Pereira set in motion a scheme to secretly keep the Bermuda Fund open and give priority to Bermuda Fund investors in an effort to reverse the redemption. As part of the scheme, Bryson, Gutekunst and Pereira had New Stream staff secretly reorganize the fund structure so as to effectuate the priority change.”

The defendants were arrested Feb. 26, 2013. Bryson and Gutekunst are currently free on $5 million bonds, and Pereira is free on a $300,000 bond.