NJ Court Orders Former Osiris Partners LLC Principals To Pay Over $55M
A state court in New Jersey has ordered the ex-principals of Osiris Partners LLC, Ex-CEO Michael J. Spak, ex-Chairman Peter Zuck, and ex-controller Joseph C. Spak to pay more than $55 million in penalties and restitution for hedge fund fraud. Investors were bilked when the men fraudulently inflated the firm’s net asset value and diverted funds for personal spending.
Prosecutors contend that the men overstated the net asset value of the hedge fund so that management fees would be higher and losses could be hidden. Unregistered agents were hired to sell limited partnership interests. By the latter part of 2011, the net asset value of the fund was nearly nil because of the inflated management fees, the misappropriation of the money, investor payments, and trading losses. Dozens of investors were harmed.
The New Jersey Division of Consumer Affairs and the Bureau of Securities were granted summary judgment in this case.
Ex-SAC Hedge Fund Manager Gets 3 ½ Year Prison Sentence
Michael Steinberg, a former SAC Capital portfolio manager, must serve 2 ½ years in prison for insider trading. Prosecutors said Steinberg traded on information from NVIDIA and Dell insiders and made almost $2 million in illegal profits. He was found guilty last year of conspiracy and securities fraud charges.
In April, SAC, owned by billionaire Steven Cohen, settled charges of wire fraud and securities fraud that involved “systemic insider trading” and let the firm garner hundreds of million dollars in illegal profits. A federal judge approved its $1.8 billion settlement with the government and SAC closed down its investment advisory business save for overseeing Cohen’s $9 billion wealth.
Lawyer Gets Prison Sentence for Helping Rothstein Fraud
Christina Kitterman, the ex-Rothstein Rosenfeldt Adler attorney, will serve five years in prison for impersonating a Florida Bar official. According to prosecutors, even though she didn’t know Scott Rothstein was running a $1.4 billion Ponzi scam, she knew it was fraud to impersonate Adria Quintela, the head of the bar’s office in Fort Lauderdale.
While pretending to be Quintela, she attempted to get some of Rothstein’s investors to keep giving him funds even though he didn’t make payments to them. The conversation allowed Rothstein’s Ponzi scam to continue for another six months when investors gave over another $553 million.
Rothstein, who is serving a 50-year prison term for the Ponzi scam, was an adjunct professor while Kitterman was a Nova Southeastern University law student. He later became her boss. She claims he was sometimes abusive but that she felt indebted to him after he helped her get into rehab for alcoholism.
Ex-New Stream Capital Hedge Fund Managers Plead Guilty to Securities Fraud
David Bryson, Bart Gutekunst, and Richard Pereira have pleaded guilty to conspiracy to commit wire fraud. The men were managers of the new defunct New Stream Capital hedge fund in Connecticut.
According to prosecutors, they hid changes they made to the fund’s capital structure to appease their Gottex Fund Management biggest investors when the market collapsed in 2008. They didn’t want Gottex to withdraw the almost $300 million it invested in New Stream. The Switzerland-based company had announced it was going to withdraw or redeem its investment because it was worried that changes made by New Stream management had subordinated the status of its investment.
New Stream then manipulated accounts outside the US to keep giving Gottex favorable treatment. According to the SEC, which filed a civil case, as the financial crisis got worse the New Stream executives wouldn’t let investors redeem or withdraw their money. They dealt with about $545 million in redemption requests. The hedge fund filed for bankruptcy protection three years ago.
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Connecticut Hedge Fund Execs Admit Fraud, The Courant, May 22, 2014
Read the SEC Complaint (PDF)
Rothstein lawyer Christina Kitterman gets 5 years in federal prison for fraud, Sun-Sentinel, May 20, 2014
Default judgment worth $55M against Osiris Fund, Washington Examiner, June 9, 2014
Hedge Fund Manager Gets 3 Year Sentence for Insider Trading, Time, May 16, 2014
More Blog Posts:
Ex-Sentinel CEO is Convicted of $500M Fraud, Stockbroker Fraud Blog, April 24, 2014
SEC Stops Former Marine’s Hedge Fund Fraud That Targeted Military Folk, Stockbroker Fraud Blog, August 12, 2013
SAC Capital Advisor’s $1.8B Criminal Securities Fraud Settlement with the DOJ is Accepted by a Federal Judge, Institutional Investor Securities Blog, April 12, 2014