(October 5, 2012) — The US Securities and Exchange Commission today has charged a pair of hedge fund managers and their firms with lying to investors about how they were handling the money invested in their firms.
“These hedge fund frauds have lured even the most sophisticated investors using the siren song of outsized returns or secured and guaranteed investments,” said Robert Khuzami, director of the SEC’s Division of Enforcement, in a statement. “As fraudsters increasingly capitalize on the cachet of hedge funds, we will maintain our strong presence in policing this industry.”
According to the SEC’s complaint, filed against Banet and Lion Capital Management in federal court in San Francisco, the US regulator alleges that San Francisco-based hedge fund manager Hausmann-Alain Banet and his firm Lion Capital Management stole more than a half-million dollars from a retired schoolteacher who thought she was investing her retirement savings in Banet’s hedge fund. In the other case, the SEC charged Chicago-based hedge fund managers Norman Goldstein and Laurie Gatherum and their firm GEI Financial Services with fraudulently siphoning at least $147,000 in excessive fees and capital withdrawals from a hedge fund they managed.
The charges reflect the latest actions taken by the SEC Enforcement Division and its Asset Management Unit against hedge fund-related misconduct. “Since the beginning of 2010, the SEC has filed more than 100 cases involving hedge fund malfeasance such as misusing investor assets, lying about investment strategy or performance, charging excessive fees, or hiding conflicts of interest,” the regulator said.
Chief of the SEC Enforcement Division’s Asset Management Unit Bruce Karpati, added: “The most serious hedge fund frauds involve advisers who play fast and loose with investor money. Investors can complement the SEC’s vigilant enforcement against hedge fund misconduct by becoming increasingly wary of hedge fund managers who boast extreme performance measures and asking well-informed questions about investment strategy, fees, and potential conflicts of interest.”