Pa. Hedge Fund Manager Accused Of Fraud In Ala.

Aug 3 2011 | 10:26am ET

A Pennsylvania hedge fund manager lied to investors and misappropriated hundreds of thousands of dollars, federal prosecutors in Alabama allege.

Anthony Klatch was arrested in Florida last week, just a day after his indictment in Mobile, Ala. The Sugarloaf Township, Pa., man and a partner are accused of misleading investors about their TASK Capital Partners, which solicited more than $2.3 million from eight investors, half of them in Alabama.

Klatch and Timothy Sullivan allegedly told investors that the fund, which they founded in 2009, had already been in business for 12 years. Their prospectuses were also filled with other "material misrepresentations and material misleading omissions," the indictment alleges.

According to prosecutors, Klatch and Sullivan, who each invested a whole $1 in TASK, invested only about 60% of the money they raised by the end of 2009, losing everything on a handful of spectacularly bad investments, at least two of which posted big losses in just minutes. The rest of the money was used to "pay off the angry investors" or simply funneled into Klatch's "personal bank account," prosecutors say.

Rather than coming clean, in January 2010 Klatch and Sullivan told investors that "their entire investment had been lost in a single trade."

If convicted on all 18 counts, Klatsch faces up to 330 years in prison.

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