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Thursday, 19 January 2017
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Feb 15 2012 | 2:46pm ET
Four years after closing its doors in the face of a Securities and Exchange Commission lawsuit, hedge fund Pentagon Capital Management has been ordered to pay the piper.
A federal judge in New York yesterday ordered the London-based firm and CEO Lewis Chester to pay $76.8 million. Pentagon and Chester had fought the charges that it late-traded mutual funds at a trial last year, but U.S. District Judge Robert Sweet found in favor of the SEC.
"The defendants intentionally, and egregiously, violated the federal securities laws through a scheme of late trading," Sweet wrote. "This scheme was broad-ranging over the course of several years and in no sense isolated."
The judgment against Pentagon and Sweet calls for $38.4 million each in disgorgement and civil penalties.
Pentagon in March 2008 said it would liquidate in expectation of the SEC's allegation. A week later, the SEC filed its lawsuit, accusing the once-US$2.2 billion hedge fund of defrauding mutual funds from June 1999 through September 2003.
"We are extremely disappointed by the judgment and intend to appeal," Frank Razzano, a lawyer for Pentagon and Chester, told Bloomberg News.