Tuesday, 27 January 2015
Last updated 2 hours ago
Apr 24 2013 | 10:56am ET
Former investors in hedge fund MICG Investment Management have been parading to the witness stand last week and this, telling a jury that MICG CEO Jeffrey Martinovich routinely misled them about what they were investing in.
One alleged victim, Bill Carper, testified that he had recorded a conversation with Martinovich in 2010. "I felt I was not getting straight information from Mr. Martinovich," Carper told a jury Monday.
According to Carper, Martinovich dismissed the investigation in MICG as part of an industry-wide probe due to the Bernard Madoff Ponzi scheme, and suggested that a major MICG investment, EPV Solar, was simply "reorganizing." He even pushed Carper to invest in EPV himself, Carper said.
"I learned after the fact [EPV] actually filed for bankruptcy in February," Carper added.
Martinovich is accused of inflating the value of his hedge fund to overcharge investors. He faces up to 520 years in prison if convicted of all 26 counts against him.
Other investors echoed Carper's allegations, claiming that Martinovich preyed on their lack of understanding of hedge funds—especially their illiquidity.
"I didn't really know what a hedge fund was; I was busy practicing medicine," Thomas Stiles told the jury. "I was retirement age and I didn't want to get into something I couldn't get out of." Stiles said that Martinovich told him he'd have no problem redeeming his investment.
Another investor, Jeff Wassmer, said that Martinovich told him that MICG was "getting crazy returns." He added that he spent a year trying to redeem from the fund.
"I felt betrayed," Wassmer said. "I thought there was a friendship there, a bond there. Everything I'd been told or promised about the hedge fund didn't exist."
Martinovich's lawyer noted that all investors had signed documents noting that quick redemptions might not be possible.
On cross-examination, Martinovich's lawyer noted that Carper had told MICG he was comfortable with the risks associated with a more aggressive strategy. Carper shot back that he was not prepared to take "an integrity risk."
"No matter how good an investment is, if the integrity's not there, it is not a good investment," he added.
Jan 23 2015 | 1:00pm ET
In our new section, FINtech Focus, we will profile one of these firms each week. While fintech is a broad category, we will be focusing on firms that specifically cater to the alternative investment industry. Read more…