San Francisco and Chicago Hedge Fund Managers Charged with Defrauding Investors
in SEC Hedge-Fund Crackdown
The Securities and Exchange Commission has charged twobrokerage firms and
their managers for lying to investors. The SEC claimed that the
hedge fund managers falsified reports of how invested money was being handled. The
charges against the hedge fund managers are the latest in a series of
more than 100 Complaints filed against hedge fund managers and firms since 2010.
According to Robert Khuzami, Director of the SEC’s Division of Enforcement:
Hedge fund frauds have lured even the most sophisticated investors using
the siren song of outsized returns or secured and guaranteed investments.
The SEC will continue to file enforcement actions against hedge fund managers
and firms as long as fraudsters increasingly capitalize on the cachet
of hedge funds.
According to one of the Complaints filed last week, Hausmann-Alain Banet,
a hedge fund manager at Lion Capital Management, participated in a scheme
to defraud an investor, a retired schoolteacher, out of a half a million
dollars. Banet allegedly led the investor to believe that the $550,000
investment would be invested in the stock market. Instead of investing
the funds as represented, however, Banet allegedly took the money and
used it to pay for his personal and business expenses. The Complaint further
claims that Banet provided the teacher with falsified
account statements in order to cover up the alleged scheme.
Banet also faces criminal mail fraud, wire fraud, and money laundering
charges in connection to the alleged scheme. California authorities arrested
him on Oct. 3. A bail hearing has been scheduled for tomorrow, Oct. 9,
according to Bloomberg News.
The second Complaint filed last week accuses two hedge fund managers, Norman
Goldstein and Laurie Gatherum of GEI Financial Services, of fraud. According
to the complaint, Goldstein and Gatherum stole more than $147,000 from
investors by charging exorbitant fees and capital withdrawals.
According to the Complaint, Goldstein, Gatherum, and GEI neglected to tell
the hedge fund’s investors how their fees would be calculated. They
also failed to disclose the facts that Goldstein, who was allegedly responsible
for all of the investment decisions made on behalf of GEI’s clients,
lost his securities registration in 2011 and had been barred from providing
investment advice in Illinois.