Arrowhead Capital Management founder James Fry's fate is now in the hands of a jury.
The hedge fund manager, who is charged with aiding and abetting the $3.65 billion Thomas Petters Ponzi scheme, lied to investors to win millions of dollars which he then turned over to—and lost with—Petters, prosecutor Kimberly Svendsen said during her closing argument yesterday.
Fry faces 12 counts of fraud and lying to the Securities and Exchange Commission. While prosecutors do not allege that he knew Petters was running a scam, they say he covered up Petters' default on notes owned by Arrowhead, lying to investors and potential investors about them. The government also alleges that he lied to clients about the criminal history of Petters' chief fundraiser, Frank Vennes.
Fry's lawyer, Joe Friedberg, countered that Fry had no ideas that Petters was up to no good.
"His investors knew an awful lot of what he knew, and believed an awful lot of what he believed," Friedberg said.
"We concede that Mr. Fry was negligent as he dealt with Petters—as were hundreds of others," he continued. "But you can't convict on negligence, carelessness or a mistake."