Thursday, 11 February 2016
Last updated 4 hours ago
Feb 19 2013 | 8:59am ET
A Massachusetts Institute of Technology professor who last year settled allegations he and his son lied to investors in their hedge fund has been sued by a disgruntled client.
George Crawford said Gabriel Bitran's fraud cost him $800,000. Crawford alleges that Bitran and his son lied about the quantitative strategies the former vice dean of the Sloan School of Business had allegedly created; the Securities and Exchange Commission said those strategies, like just about everything else the Bitrans told the people who invested more than $500 million with them, was a lie.
"The GMB funds were marketed as complex investment opportunities, targeting high net worth investors," Crawford's lawsuit, filed in Massachusetts state court, alleges. "The Bitrans made three material misrepresentations to induce plaintiffs to invest approximately $1.5 million in their funds: first, they represented that the GMB funds would invest by following a complicated proprietary algorithm developed by Gabriel Bitran, who at the time was a professor at the Massachusetts Institute of Technology and the former vice-dean of that institution, and any investments not made pursuant to the algorithm would be made in seven specifically identified hedge funds; second, it was represented that Gabriel Bitran had successfully invested for his own personal account by using his proprietary algorithm from 1998 through 2006; and third, it was represented that Gabriel Bitran would be actively involved in the management and investing of the GMB funds."
"Contrary to their representations, however, investors' funds were not invested as claimed. First, although Gabriel Bitran claims to have developed a proprietary trading algorithm, he never actually invested any funds pursuant to his algorithm. Second, the GMB funds were not invested as represented—with 60% being invested pursuant to the Gabriel Bitran algorithm and 40% in specifically designated hedge funds—instead 100% of the funds were invested in other investment funds. Third, Gabriel Bitran was not involved in the management or investing of the funds. Plaintiffs have suffered significant losses and the GMB funds are now in liquidation."
The Bitrans in April agreed to pay $4.8 million to settle the SEC's allegations, and accepted bans from the securities industry. Neither admitted nor denied any wrongdoing.