Things went rapidly from bad to worse yesterday for a pair of Pacific Northwest hedge fund managers.
First, the Securities and Exchange Commission sued Yusaf Jawed and his former business partner, Lyman Bruhn, separately, accusing both men of running Ponzi schemes through their hedge funds. Then, the U.S. Attorney's Office in Portland, Ore., acknowledged that it has opened a criminal investigation of the two men.
According to the SEC, "Jawed presented himself as a sophisticated and successful hedge fund manager when all the while he was brazenly stealing his investors' money." The regulator accused the Grifphon Asset Management chief of ripping more than 100 investors off to the tune of $37 million, using the money both to pay off earlier investors and on personal expenses.
The SEC also accused Bruhn of running a Ponzi scheme at his Sasquatch Asset Management and Pearl Asset Management for more than a decade. The lawsuit alleges that "Bruhn ceased operating a legitimate hedge fund business" and launched the Ponzi scheme after he suffered huge losses in 2000.
The SEC also sued two lawyers from Jawed and Bruhn, Robert Custis and Jacque Nichols. Bruhn and Nichols have struck preliminary settlements with the SEC, which has agreed to waive some $700,000 in penalties against them. The regulator said neither was able to pay. Bruhn did accept a lifetime ban from the industry.
Jawed and Bruhn face a large number of lawsuits filed by investors.