Thursday, 24 July 2014
Last updated 1 hour ago
Dec 2 2011 | 12:00pm ET
A London hedge fund manager has been arrested and charged with overvaluing his fund's assets to earn higher fees.
Michael Balboa was charged yesterday with fraud and conspiracy. He is being held pending a bail agreement and will plead not guilty to the allegations, his lawyer said.
According to prosecutors, Balboa invested in illiquid bonds, some in Nigeria and Uruguay, which he and two brokers then inflated in value. Those bogus values were then hidden from Millennium Global Investments' independent auditor and trumpeted to Millennium's clients in monthly newsletters. The fund, which claimed to manage US$844 million, collapsed in 2008; Balboa was paid 40% of the fees the fund earned, which amounted to some US$6.5 million.
Balboa and one of the two brokers, Gilles De Charsonville, were also sued by the Securities and Exchange Commission. De Charsonville was not criminally charged. Neither Millennium Global nor any of its current employees have been accused of any wrongdoing.
Millennium Global said it had reported Balboa's "rogue behavior" to both U.S. and British authorities; charges were laid in New York because Balboa met with investors there the year the fund collapsed and traded in the U.S. Millennium Global added that it is cooperating with the probe.
Balboa left Millennium Global in 2009. His current employer, ARAM Global, said he is currently on leave from the firm.
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…