Hedge Fund Manager Accused Of $3.5M Fraud

Jan 19 2011 | 5:03am ET

A Chicago hedge fund manager has been arrested and charged with defrauding investors of more than $3.5 million.

According to the Federal Bureau of Investigation, James Brandolino ripped off about 48 high-net worth investors. For a time, his commodity trading made money—a lot of money. His Falcon Stock Index fund returned 15.5% from mid-2007 through July 2008. But on either side of that halcyon year for the commodity pool were only lies, according to the criminal complaint against Brandolino.

From 2003 to 2007, Brandolino lost most of the $1.5 million he raised, but sent investors bogus account statements showing steady returns, according to prosecutors. And after his year of good fortune, he abruptly closed the Falcon fund—but allegedly didn’t tell investors and didn’t return their money.

Prosecutors said Brandolino returned about $1.1 million of the money raised in the form of redemptions. The rest were split between investment losses and lavish spending on himself, including a luxury car and interest in an unbuilt condominium in Greece.

Brandolina was charged with mail fraud in Chicago federal court after turning himself in yesterday. He is being held in custody, facing up to 20 years in prison.

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