Friday, November 11, 2011

SEC Charges Feeders to Ponzi Scheme

The SEC charged two Minnesota-based hedge fund managers and their firm for facilitating a multi-billion dollar Ponzi scheme operated by a Minnesota businessman.

The SEC alleges that three parties (two individuals and a business) invested more than $600 million in hedge fund assets with the Minnesota businessman while collecting more than $42 million in fees. The Commission alleges that the three falsely assured investors and potential investors that the flow of their money would be safeguarded by the operation of collateral accounts when in reality the process did not exist as explained. When the Minnesota businessman was unable to make payments on investments held by the funds they managed, the three parties helped to conceal this by entering into secret note extensions with the Minnesota businessman. 

This is the fourth enforcement action that the SEC has brought against hedge fund managers that collectively fed billions of dollars into the Ponzi Scheme.

SEC Charges Feeders to Ponzi Scheme
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