Wednesday, 23 July 2014
Last updated 8 hours ago
Apr 23 2010 | 12:04pm ET
A New Jersey hedge fund has denied that it uncovered a Ponzi scheme three years before it collapse—and did nothing about it.
Mountain Capital Management and its founder were sued last month by the receiver for Westgate Capital Management, whose founder, James Nicholson, pleaded guilty to running a $133 million fraud last year. According to Nicholson, who will be sentenced a week from today, Mountain Capital’s Neil Monteleone “learned of the Westgate fraud sometime in early 2006.”
Nicholson told receiver Lee Richards that Monteleone used that information to extract better terms from Westgate, threatening to “go to the SEC” if Mountain Capital did not get its money back, plus the fictitious profits.
Despite its alleged knowledge of the fraud, Mountain Capital invested another $1 million with Westgate—but in a managed account.
“Defendants sought these protections because of their knowledge of Nicholson’s fraudulent scheme,” the lawsuit alleges.
Mountain Capital and Monteleone deny the allegations.
“In contrast to Nicholson’s paraphrased testimony, of a convicted felon, Mr. Monteleone denies that he had any knowledge that Mr. Nicholson was operating a Ponzi scheme,” their lawyer, Anthony Paccione, said. “Why would he have invested a second time? He was defrauded by Nicholson, like everyone else.”
Richards is seeking $25.6 million from Mountain Capital and the Monteleones, including $13.4 million in bogus profits.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…