SEC Raps Hedge Fund Manager For Improper Investments

Jan 31 2011 | 1:38am ET

A Connecticut hedge fund manager has been accused of improperly using tens of millions of dollars of client money to fund unauthorized investments in a series of companies that he controlled.

The Securities and Exchange Commission on Friday sued Francisco Illarramendi and his Stamford-based Michael Kenwood Group, accusing them of misappropriating at least $53 million invested with their $540 million Short Term Liquidity Fund. But some of Illarramendi's investments were anything but short-term or liquid, the regulator said.

Instead, he moved the millions through bank accounts he controlled into companies he controlled, more for the benefit of himself and those companies than for the investors in the hedge fund, the SEC said. In one case, he invested some $23 million in an unidentified West Coast nuclear power company which needs $5 million this month alone to pay operating expenses.

Illarramendi's other allegedly improper investments include stakes in a Spanish steel company and an early-stage energy technology company.

The SEC won an asset freeze against Illarramendi on Friday, alleging that he "was imminently planning to make additional investments using investor funds without the knowledge or consent of the investors."

"Illarramendi treated his clients' money like it was his own, diverting millions of dollars that did not belong to him," David Bergers, head of the SEC's Boston office, said. "He abused his position of trust with his clients and breached his responsibilities as an investment adviser."

The SEC is seeking disgorgement and civil penalties in the case.


In Depth

An Interview With Harvest Volatility Management's Rick Selvala

Mar 23 2017 | 5:39pm ET

Several years of extremely low interest rates have pushed some investors into equities...

Lifestyle

'Tis the Season: Wall Street Holiday Parties Back In Fashion

Dec 22 2016 | 9:23pm ET

Spending on Wall Street holiday parties has largely returned to pre-2008 levels...

Guest Contributor

SEI: Private Debt Coming Into Its Own

Mar 8 2017 | 9:24pm ET

The explosive growth of private debt over the past few years has caused the lines...

 

From the current issue of