Hedge Fund Fraudster Pleads Guilty in $40M Scam

Oct 25 2011 | 6:52am ET

Federal prosecutors won a seventh guilty plea in a $40 million hedge fund fraud case yesterday.

Brian Coats pleaded guilty to conspiracy, securities fraud, wire fraud and promotional money-laundering conspiracy. According to prosecutors, Coats and seven others ran a fraudulent hedge fund and Ponzi scheme from 2007 through the end of 2009. Many of the group's victims were elderly.

Coats, his three companies and his co-conspirators told investors they managed a hedge fund called Black Diamond. The eight transformed the scam into a Ponzi scheme when it began to collapse in 2009.

Coats faces up to 15 years in prison and a $500,000 fine.

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