Since January 2010, the U.S. Securities and Exchange Commission has cited more than 100 hedge funds for a variety of wrongdoings; including misuse of investor assets, lying about a fund’s investment strategy or performance, charging excessive fees, or concealing conflicts of interest.
“These hedge fund frauds have lured even the most sophisticated investors using the siren song of outsized returns or secured and guaranteed investments,” says SEC Enforcement Director Robert Khuzami. “As fraudsters increasingly capitalize on the cachet of hedge funds, we will maintain our strong presence in policing this industry.”
And the Commission’s actions continue apace.
Last week, the Commission alleged 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.
And, in another case, it 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 SEC also issued an investor bulletin detailing many of its recent actions and stressing the need for clients to review hedge fund offerings before putting their money down.