Hedge Funds Caught Up In Operation Broken Trust

Dec 7 2010 | 6:21pm ET

They may not have known it, but the hedge fund fraudsters and others snared by a variety of federal agencies for various financial misdeeds were part of something larger: Operation Broken Trust.

The sweep, which ran from August through last month, netted some 343 criminal defendants and 189 civil defendants who, together, are accused of ripping people off to the tune of more than $8 billion. The already-completed operation was announced yesterday by U.S. Attorney General Eric Holder.

"With this operation, the Financial Fraud Enforcement Task Force is sending a strong message,” said Holder. "To the public: be alert for these frauds, take appropriate measures to protect yourself, and report such schemes to proper authorities when they occur. And to anyone operating or attempting to operate an investment scam: cheating investors out of their earnings and savings is no longer a safe business plan—we will use every tool at our disposal to find you, to stop you, and to bring you to justice."

Among those brought to justice were seven alleged co-conspirators of Ponzi schemer Thomas Petters, including Gregory Bell, the founder of hedge fund Lancelot Investment Management, and its vice president of finance and accounting, Harold Katz. According to the Securities and Exchange Commission, Lancelot poured almost all of the $2 billion it raised into Petters' scam and later helped him cover it up through a series of bogus payments.

Also caught breaking trust were hedge fund managers Bruce Prevost and David Harrold. And like the Lanceloters, Prevost and Harrold stand accused of funneling more than a billion dollars to Petters.


In Depth

'Smart Beta' Funds In Regulators' Sights, Hedgies May Be Next

Mar 26 2015 | 11:11am ET

Funds that mimic strategies used by active managers for a fraction of the cost could...

Lifestyle

Study: Both Marriage and Divorce Lead to Negative Hedge Fund Performance

Mar 25 2015 | 6:51pm ET

Trouble at home leads to trouble in the market for fund managers, according to researchers...

Guest Contributor

Concerned About Your HFT Exposure? Hedge It!

Mar 26 2015 | 1:06pm ET

High-frequency trading has been a persistent storyline for several years. The trading...

 

Sponsored Content

    Mar 9 2015 | 6:35am ET

    Kelly RodriquesKelly RodriquesAs more investors look to diversify, many are beginning to use retirement funds to invest in alternative assets such as private equity and real estate. Kelly Rodriques, CEO & President of PENSCO Trust Company, explains how companies can connect with those looking to use their retirement accounts in a different way. Read more…

Editor's Note