Petters-Linked Hedge Fund Hit With SEC Suit

Nov 10 2011 | 9:59am ET

The Securities and Exchange Commission yesterday sued a pair of hedge fund executives for their alleged roles in the Thomas Petters Ponzi scheme.

The regulator laid charges against Arrowhead Capital Management founder James Fry and the firm's former finance chief, Michelle Palm, as well as the now-defunct Arrowhead. According to the SEC, Fry, who was arrested in July and is facing criminal charges, and Palm, who has already pleaded guilty in the case and is cooperating with prosecutors, helped Petters cover up his fraud by arranging secret note extensions with Petters and by lying to investors about the source of payments that were supposed to come from electronics retailers.

The SEC said that Arrowhead earned $42 million in fees funneling some $600 million in assets to Petters, who was convicted two years ago and sentenced to 50 years in prison for running the $3.65 billion fraud.

"Fry and Palm presented themselves as protectors of their hedge fund investors when in fact they were facilitators of the Petters Ponzi scheme," the head of the SEC's Chicago office, Merri Jo Gillette, said. "Arrowhead's promises were filled with lies and deceit, and as a result investors lost more than $600 million while Fry pocketed millions in fees."


In Depth

Exotic Assets: Investing In Rare Violins

Jan 17 2017 | 4:43pm ET

By definition, alternative investments include exotic assets far beyond your typical...

Lifestyle

'Tis the Season: Wall Street Holiday Parties Back In Fashion

Dec 22 2016 | 9:23pm ET

Spending on Wall Street holiday parties has largely returned to pre-2008 levels...

Guest Contributor

DarcMatter: The Top Trends in Alternative Investments for 2017

Jan 13 2017 | 8:22pm ET

The $7 trillion alternative investments industry is poised for continued growth...

 

From the current issue of

The healthcare sector went on a tear beginning in 2011, thanks in large part to the passage of the Affordable Care Act and its impending implementat