Hedge Fund Manager Stein Gets Nine Years For Ponzi Scheme

Feb 10 2010 | 12:02pm ET

A former New York hedge fund manager was sentenced to nine years in prison for defrauding investors of $46 million in a Ponzi scheme.

Edward Stein, who pleaded guilty in June to five counts of securities and wire fraud, had faced almost 20 years in prison. But U.S. District Judge Jack Weinstein in Brooklyn, N.Y., handed down a lighter sentence, saying Stein’s crimes fell outside the “heartland” of fraud cases and that he didn’t believe the 60-year-old would do it again.

Stein’s lawyer argued that his clients motives were as pure as they could be for a Ponzi schemer.

“Ed acted out of a desperate need to make a bad situation right and not out of personal greed or predatory impulse,” Brian Maas said. “Having dug himself an enormous hole, Stein tried to keep the ball in the air until a new business that he was building could generate revenues or create assets sufficient to pay off all of the investors.”

Prosecutors and the victims of Stein’s 11-year scam balked at that assertion.

“The government takes issue with the defendant’s assertion that the sole motivation for his misconduct was his desire to repay investors,” Assistant U.S. Attorney Scott Klugman wrote to the judge.

Speaking at the sentencing hearing, Stein’s victims were somewhat less restrained. One said he “has no conscience” and that the fraud “was an outrageous betrayal.” Another called him “a money-hungry, evil, sly fox who preyed on seniors.”

“He deserves to be away for a very, very long time,” victim Shelly Anderson said.

Stein managed two hedge funds and a life-settlement policy investment firm from his offices in Roslyn, N.Y., on Long Island. According to the SEC, he moved investor money through accounts he controlled without notifying investors, as well as lying to them about how he was investing the assets of hedge funds Gemini Fund I and Prima Capital Management Corp., as well as DISP, his life-settlement fund. (Denver-based Prima Capital Management said at the time of Stein’s arrest that it has “no affiliation in any way” with him.)

For his part, Stein offered an apology for his misdeeds.

“Somewhere in the last 10 years, I lost my sense of reality and as a result, everyone has suffered,” he told the court.


In Depth

Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.