Hedge Fund Aladdin Fined Over CDO Program Claims

Dec 19 2012 | 11:27am ET

Aladdin Capital Management and its former CFO have settled allegations that they lied to investors about its own investments in a structured credit program.

Aladdin agreed to pay $1.6 million to settle the Securities and Exchange Commission charges, while former CFO Joseph Schlim agreed to pay $50,000. Neither admitted or denied any wrongdoing.

But, according to the SEC, wrongdoing there was: Aladdin allegedly told investors in its Multiple Asset Securities Tranche advisory program that it, too, was investing in the collateralized debt and loan obligations. One marketing document said, "Aladdin co-invests alongside MAST investors in every program. Putting meaningful 'skin in the game' as we do means our financial interests are aligned with those of our MAST investors."

Aladdin actually had no such skin in the game, making no investments in CDOs in which MAST invested.

"If you sell an investment with the pitch that you are co-investing and have 'skin in the game,' then you better actually have 'skin in the game,'" SEC enforcement chief Robert Khuzami said. "Such a representation by an investment adviser or broker-dealer is an important consideration to investors in complex products."

In Depth

Financial Industry Blockchain Consortium R3 To Open-Source Platform Code

Oct 20 2016 | 9:03pm ET

Bitcoin's blockchain technology has spawned a flurry of activity among fintech startups...


U.S. Trust's Beard: The Rapid Growth of the Art Lending Industry

Oct 7 2016 | 10:55pm ET

Alternative investment managers have emerged as some of the most significant art...

Guest Contributor

Hedge Fund Marketing – Tips for Your Initial Sales Meeting

Sep 29 2016 | 5:46pm ET

There are two main goals a hedge fund should have for an initial in-person sales...