Massachusetts regulators yesterday filed charges against a pair of hedge funds, accusing them of running a foreign-exchange fraud.
William Galvin, secretary of the commonwealth, accused Eagle Trades, Osiris FX and FX Capital Services of illegally operating in Massachusetts without registering with regulators. But the troubles with the two offshore firms, Eagle Trades and Osiris, and their onshore counterparts, go run deeper: According to Galvin, both firms have refused to pay out redemptions and may be defrauding investors.
"In these uncertain economic times, it is tempting to range far and wide in search of better returns, but the searchers can fall prey to schemes that flourish in just such times," Galvin said. "Improbable rates of return, while attractive, are red flags adorning scams."
Such rates adorned the marketing documents provided by Eagle Trades at a investor meeting in Brockton, Mass., two years ago alongside Osiris and FX Capital Services. The firm allegedly promised returns of 299% to 318% in a six-month period.
According to Galvin's office, Eagle Trades claimed to have nearly $1.7 million in total assets.
In addition to the four firms charged, Eagle Trades' Terrance Osberger and Osiris' Evan Andersen, Glenn Manterfield and Alberto Sciola were also cited in Galvin's complaint.
The current case isn't the first time two of the Osiris men have run into trouble with Galvin. Andersen has been barred for life from the securities industry in Massachusetts after he and Manterfield were charged both by Galvin's office and the Securities and Exchange Commission with defrauding investors in their Lydia Capital Alternative Investment hedge fund, which collapsed in 2007.
"These two cases also highlight the importance of investors' checking on those who would sell them securities," Galvin said. "A call to the Securities Division can establish if a person or firm is registered to do business in Massachusetts. In the Osiris matter, a caller to the Securities Division would have discovered the sanctions against Manterfield and Andersen."