SEC Charges Four With Mezzanine Fund Ponzi Scheme

Sep 23 2010 | 11:41am ET

The Securities and Exchange Commission has accused four men of running a $95 million Ponzi scheme.

According to the regulator, the four were involved with a mezzanine hedge fund whose sole creditor, a Minnesota lender called Hennessey Financial, defaulted on its loans in May 2008. But instead of telling its clients, the four men “falsely claimed that the fund was positioned to profit from the U.S. real-estate downturn,” Robert Burson of the SEC’s Chicago office said.

Indeed, the fund—formerly known as the Hennessey Financial Monthly Income Fund—simply foreclosed on Hennessey’s real-estate holdings and continued to raise money. It took in some $21.6 million, on top of the $74 million it had already raised, after Hennessey’s default.

According to the SEC, the fund was managed by Minneapolis lawyer Todd Duckson, who owns Transactional Finance Fund Management, the investment adviser to the rechristened Capital Solutions Monthly Income Fund. Co-defendants Michael Bozora and Timothy Redpath owned the fund’s distributor and another adviser, Capital Solutions Distributors and Capital Solutions Management. The three men were also—along with co-defendant Owen Williams, the top executives of True North Finance Corp., the former CS Financing Corp. All of those entities, as well as the four men and the fund, were also named in the SEC complaint.

According to the SEC, the men used most of the fund’s money to maintain the properties they had foreclosed on and to pay off investors who wanted out.

Lawyers for Duckson, Bozora and Redpath all denied the allegations, while Williams’ attorney said his client was looking forward to “putting this matter behind him.”


In Depth

Kettera Q&A: The Advantages of Alternative Investment Platforms

Oct 28 2016 | 5:52pm ET

The past several years have seen a distinct push towards easier and cheaper access...

Lifestyle

Midtown's Plaza District Fades As Manhattan Office Landscape Shifts

Nov 22 2016 | 6:32pm ET

Lower leasing costs, more efficient office space and the hope of projecting an image...

Guest Contributor

Nowhere to Hide: Why the Future of Asset Management Depends on Innovation

Nov 15 2016 | 6:55pm ET

Information technology has reshaped the asset management industry’s periphery,...

 

From the current issue of

Chicago-based independent futures brokerage and clearing firm R.J. O’Brien & Associates (RJO) has hired industry veteran Daniel Staniford as Executive Director, responsible for the firm’s institutional business development in New York and London.

AVAILABLE NOW at BARNES & NOBLE

NEWSTAND LOCATOR