Investors Business Daily – In early 2004, Bret Grebow, the 28-year-old hedge fund manager, was living the high life.
He claimed the value of his hedge fund surged 40% the previous year. He bought a $160,000 Lamborghini Gallardo. He chartered a plane to travel from his mansion in Florida to his New York office. He had a girlfriend. He went to the Super Bowl and was featured in a Wall Street Journal story about the return of big spenders on Wall Street.
We all know how the story ends. In December 2005, the Securities and Exchange Commission accused Grebow and his partner of defrauding 80 investors of $12.9 million. Regulators said the monthly statements he sent his investors were phony and his hedge fund was a sham.
And his was just one of the dozen or so problem funds we hear about each year. The SEC has brought more than 50 cases against the industry since 2000, including Bayou Capital Management and Kirk Wright’s International Management Associates. The SEC said investors lost $1 billion in the schemes.
Hedge fund “managers” like Bret Grebow are why a federal raid is looming for the hedge fund industry.
It’s also why the industry needs to form a self-regulatory organization now.
