Gabriel Bitran, an ex- Massachusetts Institute of Technology professor, and his son Marco Bitran have pled guilty to securities fraud charges accusing them of bilking investors of $140 million. Through their company, GMP Capital Management, the father and son placed investor money in hedge funds linked to Bernard Madoff, who ran the Ponzi scam that defrauded clients of billions of dollars.
According to prosecutors, from 2005 to 2011 Bitran and Marco collected $500 million from investors by promising to invest their funds using an original complex mathematical trading model. The money was supposed to go into exchange-traded funds and other securities but were instead placed in hedge funds.
When the financial crisis of 2008 happened, a number of the hedge funds got into trouble. Some of their investors lost up to 75% of their principal.
The Bitrans allegedly took out around $12 million of their own money from the hedge funds but made customers wait to redeem their funds from GMP Capital Management. (In 2011, the firm name was changed to Clearstream Investments LLC.) The two of them paid themselves millions of dollars in management fees.
The father and son are accused of lying to investors by telling them that they had delivered average yearly returns of 16-23% over eight years. The U.S. Attorney said that e-mails between the Britans show evidence of this. They also purportedly made false statements to the U.S. Securities and Exchange Commission during its related investigation.
In that civil probe, the Bitrans consented to settle the hedge fund fraud charges by paying $4.8 million. The two did not deny or admit wrongdoing. They did, however, agree to an industry bar.
If the judge accepts their plea deal in the criminal securities case, the Britans are facing up to five years behind bars and then supervised release. They would have to pay back $10 million in profits.
Ex-MIT official and son plead guilty to securities fraud, Boston.com, August 12, 2014
Ex-MIT dean, son plead guilty to hedge fund scam, CNN, August 12, 2014
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