Tuesday, 22 July 2014
Last updated 1 hour ago
Jul 13 2011 | 12:19pm ET
An investor in listed hedge fund Tetragon Financial Group has sued its officers, directors and Polygon Investment Partners, alleging an "incestuous" relationship that allowed Polygon to "loot" the credit fund.
Daniel Silverstein has accused Tetragon and its manager, Tetragon Financial Management, which is owned by Polygon, of writing down its net asset value in 2008 to allow TFM to collect bigger fees when credit markets improved. Silverstein called the 2008 valuation below fair value, and cited a lawsuit filed by TFG founder Alexander Jackson in February, accusing his former colleagues of unjust enrichment.
Jackson, a co-founder of Polygon, was removed from TFG's board of directors in January for opposing the fund's investment in GreenOak Real Estate.
Silverstein also cites Leon Cooperman, the head of hedge fund Omega Advisors, which owns about 10% of TFG's shares. Cooperman told Bloomberg News of TFG's management and directors, "they've been as abusive to stockholders as anyone I've ever seen."
"Instead of faithfully serving the company's investors, defendants have engaged and continue to engage in the looting of TFG," Silverstein alleged in his lawsuit, filed in Manhattan federal court. "The investment manager, with the active complicity of the TFG board, has expropriated almost $205 million in unjust fees." TFM collects a 25% performance fee.
"Defendants have looted, and continue to loot, TFG through a series of manipulative actions entered in bad faith and in derogation of the fiduciary duties owed to them by TFG," the complaint continues. "The individual defendants and entities controlled by them were, and remain, conflicted by their web of incestuous cross-affiliation."
Silverstein's lawsuit names Polygon chiefs Reade Griffith and Patrick Dear.
TFG denied the allegations, calling Silverstein's lawsuit "factually and legally without merit" and promising to seek its dismissal "as quickly as possible."
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…