Post by wwjdthrume on Oct 7, 2005 22:06:25 GMT -6
SEC Probes Man Group Over Hedge Fund Collapse (Update1)
Oct. 7 (Bloomberg) -- The U.S. Securities and Exchange Commission is investigating whether the U.S. brokerage unit of Man Group Plc, the largest publicly traded hedge fund company, helped another hedge fund hide $175 million in losses, said people with direct knowledge of the probe.
The SEC is conducting an ``informal inquiry'' into Philadelphia Alternative Asset Management Ltd., which processed its trades through Man Financial Inc., Man Group said today in an e-mailed statement. ``We have an excellent record of regulatory engagement and compliance, and will cooperate fully with the SEC in connection with this review.''
The SEC's move broadens an investigation that began after the collapse in June of Philadelphia Alternative, which was sued for fraud along with founder Paul Eustace by the Commodities Futures Trading Commission. A court-appointed receiver in the case said in a Sept. 27 legal filing that Man Financial, the U.S. brokerage unit of London-based Man Group, set up an unauthorized, secret account that Eustace used to conceal losses equal to two- thirds of the $230 million that he had raised.
``This is very serious for Man,'' said Thomas Newkirk, a former SEC enforcement official now in private practice at Jenner & Block in Washington.
John Nester, an SEC spokesman in Washington, declined to comment. The SEC oversees the securities brokerage industry, and the CFTC regulates commodities and futures trading.
$44 Billion Assets
Man Group, led by Chief Executive Officer Stanley Fink, manages about $44 billion of assets. Its brokerage unit, based in Chicago, processes futures, options and other derivates trades for institutional investors including hedge funds.
The SEC has ratcheted up its scrutiny of hedge funds, lightly regulated private investment partnerships that cater to wealthy individual and institutions, such as pension funds. Many hedge funds bet on falling as well as rising markets, and borrow money to boost returns.
Worldwide, hedge-fund assets climbed to $1.03 trillion in the second quarter from $490 billion in 2000, according to Chicago-based Hedge Fund Research Inc.
In a statement last week, Man said that it has cooperated with the receiver'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,'' the statement said.
TAG, Fortune
Investors in the hedge funds managed by Eustace, a 40-year old former president of the Trout Trading hedge fund, said Man may be liable for their losses.
``Either they were complicit or stupid, and in either case, they should owe the investors,'' said Stanley Pantowich, one of the founders of TAG Associates, which invested with Eustace.
TAG, a New York-based money manager that caters to wealthy families, oversees about $4 billion. Pantowich, 64, declined to say how much the firm invested. Other investors in Eustace's funds, which traded commodity futures and options, include Fortune Group and Sperry Fund Management.
Fortune Group, based in London, invested $15.5 million, according to a court filing in the Cayman Islands by Simon Hopkins, the firm's chief executive officer. He declined to comment. Sperry, a New York-based firm that manages about $500 million, invested $22 million with Eustace, said Douglas Sperry Makepeace, the firm's president.
Porsche Seized
``Certain causes of action may well vest in the fund against various entities, including Man,'' Fortune Chief Executive Officer Simon Hopkins wrote in a sworn statement filed with a Cayman Islands court in September.
The Philadelphia firm's assets, and the money remaining in its hedge funds, have been frozen by the judge overseeing the CFTC's case, along with Eustace's personal accounts. His Porsche was seized in a storage facility in July, court filings show.
Eustace, a resident of Oakville, Ontario, in Canada, filed for bankruptcy in July. His lawyer, Jonathan Marler of Marler, Kyle, van der Steen in Oakville, said Eustace is now seeking to negotiate a settlement with the CFTC.
Eustace's main contact at Man Financial was senior vice president Thomas Gilmartin, who also was a shareholder in Philadelphia Alternative Asset Management, the receiver said. Gilmartin is on administrative leave, Man Group spokesman Paul Lockstone said last week.
So far, Man has balked at turning over e-mail, audio recordings, and computer files related to Gilmartin, Eustace and his funds, according to the receiver in the CFTC case, Clark Hodgson.
Lockstone, the Man spokesman, said yesterday that the firm planned to defend itself against Hodgson's motion.
Shares of Man Group fell 7 pence today in London trading to 1,641 pence ($28.87).
www.bloomberg.com/apps/news?pid=10000085&sid=aHySmg8vDh9g&refer=europe
Oct. 7 (Bloomberg) -- The U.S. Securities and Exchange Commission is investigating whether the U.S. brokerage unit of Man Group Plc, the largest publicly traded hedge fund company, helped another hedge fund hide $175 million in losses, said people with direct knowledge of the probe.
The SEC is conducting an ``informal inquiry'' into Philadelphia Alternative Asset Management Ltd., which processed its trades through Man Financial Inc., Man Group said today in an e-mailed statement. ``We have an excellent record of regulatory engagement and compliance, and will cooperate fully with the SEC in connection with this review.''
The SEC's move broadens an investigation that began after the collapse in June of Philadelphia Alternative, which was sued for fraud along with founder Paul Eustace by the Commodities Futures Trading Commission. A court-appointed receiver in the case said in a Sept. 27 legal filing that Man Financial, the U.S. brokerage unit of London-based Man Group, set up an unauthorized, secret account that Eustace used to conceal losses equal to two- thirds of the $230 million that he had raised.
``This is very serious for Man,'' said Thomas Newkirk, a former SEC enforcement official now in private practice at Jenner & Block in Washington.
John Nester, an SEC spokesman in Washington, declined to comment. The SEC oversees the securities brokerage industry, and the CFTC regulates commodities and futures trading.
$44 Billion Assets
Man Group, led by Chief Executive Officer Stanley Fink, manages about $44 billion of assets. Its brokerage unit, based in Chicago, processes futures, options and other derivates trades for institutional investors including hedge funds.
The SEC has ratcheted up its scrutiny of hedge funds, lightly regulated private investment partnerships that cater to wealthy individual and institutions, such as pension funds. Many hedge funds bet on falling as well as rising markets, and borrow money to boost returns.
Worldwide, hedge-fund assets climbed to $1.03 trillion in the second quarter from $490 billion in 2000, according to Chicago-based Hedge Fund Research Inc.
In a statement last week, Man said that it has cooperated with the receiver'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,'' the statement said.
TAG, Fortune
Investors in the hedge funds managed by Eustace, a 40-year old former president of the Trout Trading hedge fund, said Man may be liable for their losses.
``Either they were complicit or stupid, and in either case, they should owe the investors,'' said Stanley Pantowich, one of the founders of TAG Associates, which invested with Eustace.
TAG, a New York-based money manager that caters to wealthy families, oversees about $4 billion. Pantowich, 64, declined to say how much the firm invested. Other investors in Eustace's funds, which traded commodity futures and options, include Fortune Group and Sperry Fund Management.
Fortune Group, based in London, invested $15.5 million, according to a court filing in the Cayman Islands by Simon Hopkins, the firm's chief executive officer. He declined to comment. Sperry, a New York-based firm that manages about $500 million, invested $22 million with Eustace, said Douglas Sperry Makepeace, the firm's president.
Porsche Seized
``Certain causes of action may well vest in the fund against various entities, including Man,'' Fortune Chief Executive Officer Simon Hopkins wrote in a sworn statement filed with a Cayman Islands court in September.
The Philadelphia firm's assets, and the money remaining in its hedge funds, have been frozen by the judge overseeing the CFTC's case, along with Eustace's personal accounts. His Porsche was seized in a storage facility in July, court filings show.
Eustace, a resident of Oakville, Ontario, in Canada, filed for bankruptcy in July. His lawyer, Jonathan Marler of Marler, Kyle, van der Steen in Oakville, said Eustace is now seeking to negotiate a settlement with the CFTC.
Eustace's main contact at Man Financial was senior vice president Thomas Gilmartin, who also was a shareholder in Philadelphia Alternative Asset Management, the receiver said. Gilmartin is on administrative leave, Man Group spokesman Paul Lockstone said last week.
So far, Man has balked at turning over e-mail, audio recordings, and computer files related to Gilmartin, Eustace and his funds, according to the receiver in the CFTC case, Clark Hodgson.
Lockstone, the Man spokesman, said yesterday that the firm planned to defend itself against Hodgson's motion.
Shares of Man Group fell 7 pence today in London trading to 1,641 pence ($28.87).
www.bloomberg.com/apps/news?pid=10000085&sid=aHySmg8vDh9g&refer=europe