Wednesday, 23 July 2014
Last updated 14 hours ago
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.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…