Former Zwirn CFO Accused Of Making Improper Transfers

Apr 11 2011 | 2:33pm ET

The Securities and Exchange Commission has sued the former finance chief of D.B. Zwirn & Co. over his alleged role in the accounting scandal that brought the hedge fund down.

Perry Gruss "knowingly misused" $870 million in client capital to, among other things, keep the firm afloat and help pay for a private jet purchased by one of the hedge fund's partners, the regulator said. The "unauthorized transfers" occurred between March 2004 and July 2006, according to the SEC. The agency began its probe more than four years ago; firm founder Daniel Zwirn was cleared earlier this year.

Gruss' lawyer, Nick Akerman, said that his client "categorically denies the allegations in the SEC's complaint as being without merit."

"At all times, Mr. Gruss acted in the best interests of the shareholders, and there is not even an allegation that he obtained any financial gain whatsoever from any of the transactions alleged in the complaint."

Those transactions included $576 million in transfers from D.B. Zwirn's offshore fund to its onshore fund, $273 million from the offshore fund to pay a revolving credit facility, a $22 million withdrawal to cover the firm's operating shortfalls and $3.8 million to help pay for the private jet.

Gruss left D.B. Zwirn in 2006, after an internal audit at the firm turned up the alleged irregularities. He sued the firm in 2009, accusing it of making him a scapegoat by making "a series of false and misleading statements" to investors "which sought to blame Gruss for any conceivable control issues at the company, and to shift the blame to Gruss without implicating Zwirn."

Investors headed for the exits at D.B. Zwirn after the firm, which once managed $5 billion, disclosed the accounting issues. The firm closed its largest hedge funds in February 2008, handing over control of the funds to Fortress Investment Group in 2009.


In Depth

Prominent Hedgie Renee Haugerud Embroiled in Ugly Child Custody Battle

Sep 10 2014 | 2:43pm ET

A high-profile hedge fund manager is caught up in a nasty child custody battle in...

Lifestyle

Full House’s Stamos To Play TV Hedge-Fund Manager

Sep 5 2014 | 4:43am ET

The life of a Connecticut hedge-fund billionaire is coming to the small screen.

Guest Contributor

The Cult of Loss Aversion: A Call to Rethink Risk in Global Macro Investing

Sep 4 2014 | 5:45am ET

In the wake of a traumatic loss, whether it is financial or personal, it is just...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

July/August 2014 Cover

In search of the ‘new normal’ at the Fed

The Federal Reserve keeps baby-stepping toward a “normalization” of monetary policy. But just what is normal?

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.