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Tag: hedge-fund scams

  • URGENT >> BULLETIN >> MOVING: Raj Rajaratnam Guilty In Insider-Trading Case; Sentence Potentially Could Exceed Madoff’s 150 Years

    BULLETIN: Raj Rajaratnam has been found guilty of all 14 counts of conspiracy and securities fraud filed against him in the Galleon Group insider-trading case.

    The verdict came on the 12th day of jury deliberations. It deals a devastating blow to Rajaratnam, but is a major win for prosecutors. The case was brought by the office of U.S. Attorney Preet Bharara of the Southern District of New York.

    Rajaratnam, 53, once was listed by Forbes magazine as one of the wealthiest men in the United States. Prosecutors said that crime ultimately became his business model. Wiretaps and recordings were used to convict him.

    The Justice Department has said it recent months that tools traditionally used in organized-crime investigation have been helpful in exposing white-collar fraud.

    “Raj Rajaratnam, once a high-flying billionaire and hedge fund manager, is now a convicted felon, 14 times over,” Bharara said. “Rajaratnam was among the best and the brightest — one of the most educated, successful and privileged professionals in the country. Yet, like so many others recently, he let greed and corruption cause his undoing. The message today is clear — there are rules and there are laws, and they apply to everyone, no matter who you are or how much money you have.”

    Insider trading “cheats the ordinary investor, victimizes the companies whose information is stolen, and is an affront not only to the fairness of the market, but the rule of law,” Bharara said.

    Rajaratnam traded illegally in the stock of Goldman Sachs, Clearwire, Akamai, AMD, Intel, Polycom and PeopleSupport, prosecutors said, describing the case as the “largest hedge fund insider trading scheme in history.”

    He potentially faces up to 205 years in federal prison. Sentencing is scheduled for July 29. Prosecutors said he gained nearly $64 million by trading on material, nonpublic information culled from fellow cheaters.

    Rajaratnam remains free pending sentencing. He has been placed on electronic monitoring.

    The SEC provided “extraordinary assistance,” Bharara said. The FBI led the criminal probe and also received praise from Bharara.

  • BULLETIN: Salt Lake City Man Arraigned In Atlanta On Charges Of Running Ponzi And Fraud Scheme In Which Tens Of Millions Of Dollars Mysteriously Vanished Offshore; Canadian Also Charged In Alleged Caper

    BULLETIN: Two men — one from Salt Lake City, the other from Belleville, Ontario — have been charged by federal prosecutors in Atlanta with operating a Ponzi and fraud scheme in which tens of millions of dollars mysteriously disappeared overseas.

    Thomas Repke, 57, was arraigned today in Atlanta. Prosecutors said he worked with the Canadian man, James Jeffery, 58, to fleece more than $30 million from investors.

    “This indictment alleges a major international investment fraud scheme that defrauded over 100 victims around the country out of tens of millions of dollars, most of which has been transferred to overseas accounts,” said U.S. Attorney Sally Quillian Yates.

    The scheme began in 2006 and centered around a company known as Coadum Capital in which investors were told that they were purchasing shares in hedge funds and that their investment capital was kept in “escrow” accounts and thus not at risk. Participants expected to earn up to 5 percent a month.

    “[A]lthough investors were instructed to and did transmit much of their funds to one or more supposed ‘escrow’ accounts, including one in Atlanta, the money did not stay in any such account,” prosecutors said. “Rather, unbeknownst to investors, Repke and Jeffery transferred over $20 million overseas to accounts in Switzerland and the Mediterranean island of Malta.

    “This money was supposedly invested in a series of hedge funds or other investments operated by a supposed Malta-based trader,” prosecutors said.

    But the investments “produced no earnings at all,” prosecutors said. “[B]y the end of 2007 only a fraction of the transferred funds remained deposited in these European accounts.”

    Regardless, Repke and Jeffery “continued to send account statements every month to investors continuing to represent that their funds remained intact, preserved in escrow accounts, and that monthly earnings of 3-5% continued to accrue,” prosecutors said.

    Both Repke and Jeffery had “no control” over the overseas accounts — accounts “about which they received little or no information,” prosecutors said.

    Investigators obtained correspondence that showed Repke and Jeffery both “were frustrated in their repeated requests to obtain information about where the funds were being held, how they were being used by the trader, and whether and to what extent earnings were being generated,” prosecutors said.

    The SEC referred the case for criminal investigation after bringing an administrative action and lawsuit against Repke and Jeffery in 2008, according to records.

    “Those who prey on the investing public in this way will continue to find themselves facing federal felony charges,” Yates said.

    The investigation was coordinated by the Financial Fraud Enforcement Task Force. prosecutors said Jeffery had not yet made his initial court appearance in the case.

    Repke potentially faces decades in prison, if convicted. He was charged with multiple counts of mail fraud, wire fraud and conspiracy.

    (NOTE: The SEC complaint references a Malta company known as “Exodus Equities Inc,”  which apparently was tied to an entity known as “Exodus Platinum Genesis Fund Ltd.” Also of note for additional case information/filings is the website of Pat Huddleston, the court-appointed receiver in the SEC case.)