Hedge Fund Manager Sentenced to 4 Years in Prison
A hedge fund manager charged with scheming to inflate securities valuations was sentenced to 4 years in prison and ordered to pay nearly $400 Million in restitution. According to the SEC complaint, the respondent/defendant conspired with two brokers to provide fictional prices for certain illiquid securities, thereby overvaluing the assets and reporting false NAVs. The action arose out of the SEC’s aberrational performance inquiry where the SEC examines data to find red flags in reported performance (see http://blog2.cipperman.com/2011/12/sec-uses-outlier-returns-to-identify-risky-hedge-funds/). The SEC referred the case to the U.S. Attorney for criminal charges.
OUR TAKE: SEC Chair Mary Jo White has stated her intent to refer more cases to the DoJ for criminal prosecution because of its deterrent effect.