You can find background on the Cornerstone case right here. As for what's happening in the new and now, former Cornerstone Capital Management executive, Joseph Profit the second (and how could you go wrong with a hedge fund manager of that name?) was in the news, having received a permanent injunction preventing he and his firm from profiting further from their fraudulent activities. They'll also face civil penalties and be forced to pa restitution to wronged parties - amounts as yet uncertain.

-- MDT

Labels: CFTC, Cornerstone Capital Management, Joseph Profit

New York-based hedge fund, Cornerstone Capital Management and company executive Joseph Profit (oh come on - he made that name up!) are facing fraud charges from the Commodity Futures Trading Commission. The CTFC complaint, filed in the Georgia Northern District Court accuses Profit and Co. of concealing material information from the National Futures Association and defrauded investors by missrepresenting potential rates of return.

Further details via Hedgeweek. You can check out Cornerstone's NFA suspension here as well as the CTFC press release here.

-- MDT

Labels: CFTC, Cornerstone Capital Management, Fraud, hedge fund, Joseph Profit

The Commodity Futures Trading Commission has filed a case against Anthony Ramunno, Jr., CEO of Roswell, Georgia-based Renaissance Asset Management. Ramunno and Renaissance have been barred from destroying any documents.

Investors had become suspicious that the pool of investment dollars under Ramunno's care wasn't quite the $32 million Renaissance claimed. An audit of the firm only identified about $4million and according to the CFTC complaint, Ramunno subsquently contacted the FBI offices in Atlanta and admitted committing fraud.

Further details here.

You can aslo read the CFTC press release or check out the online complaint (pdf).

-- MDT

Labels: Anthony Ramunno, CFTC, Fraud, Rennaisance Asset Management

Two New York-based hedge funds have been ensnared by a U.S. Commodity Futures Trading Commission investigation into their sale of illegal foreign currency futures contracts. Also in the crosshairs is the man behind both Century Maxim Fund Inc. and AJR Capital Inc., one Alexsander Efrosman, AKA Alex Besser (always got to wonder about those AKAs).

Given this guy's past history I can't imagine anyone doing business with him again (fleeing thr country for fear of prosecution is never a good sign). However, given what we do for a living, I guess I shouldn't be surprised. The original CTFC complaint was filed (and sealed) back in September '05 but as of January 24 the seal is off and the word is out.

More via Cattlenetwork.com (yes, of course I read Cattle Network!):

CFTC Charges Two Staten Island Hedge Funds In Foreign Currency Scheme

January 30, 2006
Cattlenetwork.com

The U.S. Commodity Futures Trading Commission (CFTC) announced today that it filed a federal injunctive action against Alexsander Efrosman, a/k/a Alex Besser, of Staten Island, New York, and two hedge funds under his control, Century Maxim Fund Inc., and AJR Capital Inc., charging them with fraud in the sale of illegal foreign currency (forex) futures contracts.

Specifically, the CFTC alleges that, between April 2004 and June 2005, defendants fraudulently solicited and obtained more than $5 million dollars from as many as 110 customers for the purpose of trading managed accounts in forex futures contracts that were not, as required, traded on a registered entity. The complaint alleges that defendants misappropriated the funds.

Efrosman was previously indicted for mail and wire fraud relating to foreign currency trading in a different scheme, and fled the country. He subsequently was extradited from France to face trial, and in November 2000, pleaded guilty to nineteen counts of mail and wire fraud before the U.S. District Court for the Southern District of New York, and was sentenced to a term of three years of imprisonment.

The CFTC’s complaint alleges that shortly after his release from prison, Efrosman engaged in a new forex scheme through purported hedge funds Century Maxim Fund and AJR Capital. Allegedly, he fraudulently solicited customers to trade forex through Century Maxim Fund, which, Efrosman falsely represented as a hedge fund that had attracted investments from a large number of high net-worth individuals. The complaint also alleges that Efrosman fraudulently solicited customers for forex trading through AJR Capital, which, Efrosman represented to be an opportunity for customers of more modest means to profit from forex trading. According to the complaint, Efrosman misappropriated more than $300,000 from Century Maxim Fund investors and more than $4.9 million from AJR Capital investors.

The complaint also alleges that Efrosman provided his customers with fictitious Century Maxim and AJR Capital account statements reflecting trades that did not actually occur, and profits that did not exist. According to the complaint, the fictitious statements were instrumental in the propagation of the fraud and the solicitation of new customers. Finally, the complaint alleges that all the purported forex trading Efrosman solicited customers to undertake was illegal, as the contracts he solicited were futures contracts that could only be traded on a registered entity.

The CFTC filed its complaint on September 30, 2005. On that same day, court orders were entered which, among other things, froze defendants’ assets and sealed the complaint. The court’s seal was lifted on January 24, 2006. In its complaint, the CFTC is seeking preliminary and permanent injunctive relief, a freeze of defendants’ funds, restitution for defrauded customers, civil monetary penalties, and disgorgement of ill-gotten gains.

The original article appears here.

-- MDT

Labels: CFTC

Via Hedgeweek.com:

CFTC files fraud action against Lake Dow Capital and its hedge fund

November 8, 2005
Hedgeweek

A US Federal Court has frozen the assets of the Aurora Investment Fund and its operators Lake Dow Capital, LLC and Ty Edwards. The US Commodity Futures Trading Commission announced that the United States District Court for the Northern District of Georgia entered a restraining order freezing the assets of Lake Dow Capital, LLC and Ty Edwards in a CFTC action alleging fraud committed by those parties. The order also froze the assets of hedge fund Aurora Investment Fund.

Specifically, the CFTC’s complaint alleges that Lake Dow, a registered commodity pool operator and commodity trading advisor, and Edwards, a principal and registered associated person of Lake Dow, falsely represented to actual and prospective participants in the Aurora Fund commodity pool, a hedge fund operated by Lake Dow and Edwards, that Aurora Fund had consistently generated annual profits without a single losing month.

The complaint further alleges that Lake Dow and Edwards misrepresented to actual and prospective participants that they managed between USD 60 and USD 100 million, when funds in the Aurora Fund did not exceed USD 20 million. According to the complaint, Edwards also attributed to the Aurora Fund performance results that were not based upon any actual financial documents, actual performance, or any analysis thereof.

The complaint also alleges that Edwards failed to disclose to participants in the commodity pool the fact that he is a named defendant in a pending Commission civil injunctive action alleging fraud, CFTC v. Risk Capital Trading Group, Deron Baugh, Tyrone Edwards, et. al, Case No. 103 CV-2633 (N.D. GA 2003), and that he withheld material information from the National Futures Association (NFA) by willfully concealing the identity of certain participants in the pool.

The CFTC’s ongoing action seeks orders of preliminary and permanent injunction against the defendants, an accounting for all funds, disgorgement of benefits, repayment to injured participants, monetary penalties and other relief. The National Futures Association assisted the CFTC in its investigation of this matter.

The original article appears here.

-- MDT

Labels: CFTC

Check out these two great stories from Kieran Flatt at Legal Week.

The first gives a run-down of recent developments in the offshore legal envrionment in key international financial hotspots such as Bermuda, the Cayman Islands, Guernse, the Isle of Man, and Jersey.

The second concerns an ingoing investigation into the role that Man Financial, the futures brokering subsidy of The Man Group, may have played in helping the now collapsed hedge fund, Philadelphia Alternative Asset Management Co. (PAAM) obscure the existance of $175 million shortfall.

The accusations against Man arise from a U.S. Commodity Futures Trading Commission inquiry into fraud at PAAM. PAAM and it's president Paul Eustace were sued in back in June 2005 by the CFTC. The SEC is also reportedly investigating. The CTFC lawsuit aledges that:

The CFTC alleges he did this by telling investors his commodity trading pool was increasing in value when, in fact, it had lost more than $140-million from February, 2005, to May. The CFTC alleged the fraud dates back to 2001 and that Mr. Eustace enticed clients to invest in one fund that did not exist by showing them fictitious monthly trading statements. He also allegedly co-mingled client money with his own accounts.

Clarke Hodgson, the reciever appointed by the CTFC to track down PAAM assets on behalf of investors, in court documents also points blame at Man Financial for the PAAM cover-up and names Man senior vice-president Thomas Gilmartin as the executive primarily responsible:

Mr. Hodgson alleged that Mr. Gilmartin, who worked in New York, handled trades for Mr. Eustace and was a part owner of PAAM. He also alleged Mr. Gilmartin doctored some trading records in order to boost the returns of some of PAAM's funds and that he covered up huge losses. Mr. Gilmartin was recently placed on administrative leave by Man Financial. Mr. Hodgson has filed a contempt motion against Man Financial alleging the company has violated an earlier court order by withholding key documents.

“Despite the suspicious trades between accounts, the unusual transfers between accounts and the back-dating of transactions that occurred at Man Financial, Man Financial has produced no records justifying why these trades, transfers and back-dated transactions took place,” he alleged in a court filing. “The documents produced to date suggest that Man Financial had knowledge of the conduct described [by the receiver] and consented to and assisted in that conduct.”

In a statement, Man Financial said it was “surprised and disappointed” by the receiver's actions. “We have provided more than 4,200 pages of documentation at the request of the receiver, and have offered to meet him to discuss any further requirements that he has — an offer that has to date been ignored. The receiver's actions are at odds with public statements he has made to the effect that he has received a ‘high degree of co-operation from most parties involved and no one has yet refused to provide documents requested,'” the company said...“We have an excellent record of regulatory engagement and compliance, and will co-operate fully with the SEC in connection with this review,” Man Group said.

Gilmartin, who was a shareholder in PAAM and their primary point of contact at Man Financial was suspended from his position in late September pending the results of the ongoing investigation.

-- MDT

Labels: CFTC

Via The Guardian, UK:

SEC opens inquiry into Man's $175m hedge fund losses

Nils Pratley
October 10, 2005
The Guardian

The United States' securities and exchange commission, the world's most powerful financial regulator, has launched its own investigation into allegations that Man Group helped to hide losses of $175m (£100m) from investors in a Cayman Islands hedge fund.

The SEC is thought to have begun its inquiry within the past week into the collapse of Philadelphia Alternative Asset Management (PAAM), a hedge fund for which Man Financial, Man's brokerage business, transacted trades. It comes as investors have started behind-the-scenes discussions to determine whether to launch multi-million pound claims for compensation against Man.

The SEC's involvement follows serious charges made by the receiver to PAAM a fortnight ago. Clark Hodgson alleged in a motion to hold Man Financial in contempt of court that the firm opened and operated an unauthorised bank account for Paul Eustace, manager of the PAAM funds, through which losing bets on the commodity markets were dumped.

Man Financial, Mr Hodgson claims, kept this account secret from investors and the fund's administrator, the Swiss bank UBS, even when losses reached a "staggering"$175m. In a statement, Man said: "We have an excellent record of regulatory engagement and compliance, and will cooperate fully with the SEC in connection with this review."

The Financial Services Authority, the UK's chief financial watchdog, has declined to comment on the allegations against Man, a FTSE 100 company worth £5bn and with $44bn under management.

Man last week suspended Thomas Gilmartin, a senior broker in its New York office who was named by Mr Hodgson as a "main contact" for Mr Eustace. It also ordered its compliance department to conduct an internal investigation and maintains: "There are a number of areas where we do not agree with the receiver's interpretation of information obtained during his investigation."

Mr Gilmartin was an investor in PAAM, the receiver alleges in his court motion. Such an arrangement between prime broker and client - if proved - would be unusual, according to hedge fund experts.

Man is also accused by Mr Hodgson in his motion of refusing to disclose documents relevant to his inquiry and his efforts to recover money for investors, namely "correspondence, notes, email, memos, computer files, audio tape or other records from the files of Thomas Gilmartin".

Man says it has cooperated fully with Mr Hodgson's investigation. "We have provided more than 4,200 pages of documentation at the request of the receiver, and have offered to meet him to discuss any further requirements that he has - an offer that has to date been ignored."

Man has not been charged with any offence. Legal action by the commodities futures trading commission, the US regulatory body that launched its investigation in June, has been confined to charges of fraud against Mr Eustace and PAAM.

That has not stopped PAAM investors discussing the possibility of litigation against Man. Stanley Pantowich, a founder of $4bn New York money manager TAG Associates, which invested with Mr Eustace, told the Bloomberg news service last week: "Either they [Man Financial] were complicit or stupid, and in either case they should owe the investors."

Such openness is unusual in the world of hedge funds and reflects the furore the affair has caused within the industry. Reasons include the size of the apparent trading losses and the speed with which they seem to have been incurred - between February and May this year.

Thomas Gilmartin, the Man Financial broker at the heart of the inquiries, may have known Paul Eustace for about 20 years. Mr Eustace, head of the collapsed Cayman Islands fund, and Mr Gilmartin attended Wharton business school at the University of Pennsylvania in the 1980s. Mr Gilmartin gained a Bachelors of Business Administration in 1988. Mr Eustace received a BSc in economics the previous year.

The original article appears here.

-- MDT

Labels: CFTC