Thursday, 24 July 2014
Last updated 1 hour ago
Sep 28 2011 | 3:05pm ET
After years of rumors, allegations and investigations, hedge fund manager Corey Ribotsky has been formally accused of wrongdoing.
The Securities and Exchange Commission today filed suit against Ribotsky and his NIR Group, alleging that the former misappropriated more than $1 million to fund a lavish lifestyle.
According to the SEC, NIR, which specializes in private investments in public equities, and Ribotsky made a habit of lying to investors about the performance of the firm's hedge funds and its liquidity. Worse still, Ribotsky began stealing from NIR's AJW Funds beginning in the summer of 2004, cutting checks to either himself or "cash" and using the proceeds to buy luxury cars and a Rolex watch.
"In a classic betrayal of trust, Ribotsky stole from his investors and falsely assured them that his struggling hedge funds were thriving," SEC enforcement chief Robert Khuzami said. "This enforcement action reflects our continuing commitment to bring to justice individuals and companies that committed fraud during the credit crisis."
Daryl Dworkin, a former analyst for NIR who pleaded guilty to taking kickbacks last year, was also named in the SEC complaint. In one instance, the SEC said that Dworkin doctored an investor chart to show almost twice as much in investments as were actually made during one period.
The complaint also alleges that Ribotsky made Ponzi scheme payments to several investors in 2007, and that he failed to conduct any meaningful due diligence prior to the sale of $43.2 million in fund assets in 2008—a transaction that allowed him to report "realized" gains without actually getting any money.
NIR has been the subject of a federal fraud and kickbacks probe for about two years. The hedge fund has also been sued twice by investors who claim, like the SEC, that Ribotsky essentially made up its returns. One of those lawsuits was dismissed in May.
The SEC is seeking disgorgement and monetary penalties.
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…