Jailed ThinkStrategy Founder Fined $5 Million

Accused hedge fund fraudster Chetan Kapur was hit with a $5 million judgment as he seeks to avoid a prison term.

Kapur, founder of New York-based hedge fund ThinkStrategy Capital Management, agreed to allow a court to determine the penalties against him after the Securities and Exchange Commission sued him last year.

Kapur was arrested on criminal fraud charges in July. A month later, the SEC filed a motion for disgorgement, prejudgment interest and fines. U.S. District Judge Paul Engelmayer agreed with the regulator's finding that Kapur made no distinction between ThinkStrategy's funds and his own, and ordered him to pay $4.99 million.

Kapur is accused of misleading investors in his once-$520 million firm. In addition, the SEC alleged that ThinkStrategy's due diligence standards were so lax that it invested in three Ponzi schemes: Bayou Group, Arthur Nadel and Grant Grieve.

If convicted, Kapur faces up to 100 years in prison. He remains in custody pending his trial.