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

Financial Industry Blockchain Consortium R3 To Open-Source Platform Code

Oct 20 2016 | 9:03pm ET

Bitcoin's blockchain technology has spawned a flurry of activity among fintech startups...


U.S. Trust's Beard: The Rapid Growth of the Art Lending Industry

Oct 7 2016 | 10:55pm ET

Alternative investment managers have emerged as some of the most significant art...

Guest Contributor

Hedge Fund Marketing – Tips for Your Initial Sales Meeting

Sep 29 2016 | 5:46pm ET

There are two main goals a hedge fund should have for an initial in-person sales...