West Palm Beach (HedgeCo.Net) – Two men involved in a hedge fund scam that defrauded investors out of $6 million were sentenced yesterday in Los Angeles. Keith Gilabert, 33, of Valencia, CA, will serve the maximum five year prison sentence and pay $1 million in restitution.
Gilabert ran a hedge fund called GLT Venture Fund through his company, Capital Management Group. With the help of Justin Paperny, 32, an ex-broker at UBS AG, Gilabert was able to convince investors to hand over large sums of money by fabricating numbers and making false claims.
Paperny admitted to taking kickbacks from Gilabert in the amount of $65,000 and lying to investors about the performance history of the GLT fund, and the risk associated with investing in it. In addition to the kickbacks, Paperny received about $155,000 in commissions for GLT trades he made through UBS. For his role, Paperny was sentenced to 18 months in prison, and ordered to pay just over $510,000 in restitution.
Gilabert claimed the GLT fund earned annual returns of 27 percent, which was far from the truth. The fund actually lost $7 million and distributed about $4.6 million falsely labeled as profits in what turned out to be a Ponzi-like scheme. Gilabert also used $2.5 million of that money for his own personal use. 42 investors poured $14.1 million into Captial Management from September 2000 to January 2005, when the company closed.
Paperny and Gilabert met in 1998 while working at the same brokerage firm.
Julie Scuderi
Senior Editor for HedgeCo.Net
Email: [email protected]]
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