Double Eagle Hedge Fund Fraudster Pleads Guilty

Mar 26 2010 | 4:05am ET

A Colorado hedge fund fraudster has pleaded guilty to charges that he ripped clients off to the tune of $2.1 million.

Cary Kahn entered his plea to one charge of mail fraud on Wednesday. He admitted that he told clients his Double Eagle Fund was earning double-digits returns, but in fact spent much of the money he raised satisfying his vices.

Kahn told U.S. District Judge Wiley Daniel in Denver that he sent investors phony account statements touting big returns. But he admitted that the fund never had “a legitimate purpose or existence.”

Instead, he spent the money raised from 14 clients between 2002 and last year on alcohol, marijuana and gambling. Asked by the judge what his drink of choice was, Kahn answered, “vodka.” The fraudster said he also spent investor money to pay his own living expenses.

He also admitted that he hid a 2004 action against him by the Securities and Exchange Commission for market manipulation, and that he had never repayed the $12,000 in illicit profits he earned doing so.

“I took advantage of other people,” he said. “I dug a hole. Things were getting worse and I was trying to make them better, and things kind of cannon-balled.”

Kahn faces up to 12-and-a-half years in prison when he is sentenced on June 28.

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