SEC Says San Francisco Hedge Fund Manager A Fraud

Sep 27 2007 | 7:52am ET

We can’t speak about their hearts, but approximately 100 investors allegedly left their money in San Francisco, and in the wrong hands.

The Securities and Exchange Commission has charged a San Francisco hedge fund manager with lying to investors and misusing their investments, it said yesterday.

Alexander Trabulse allegedly used his Fahey Fund as his own personal kitty, spending investor money on cars, a home theatre system and an overseas shopping allowance for his ex-wife, all the while boasting to investors about astronomical—and, apparently, fictional—returns of upwards of 200%.

“Trabulse betrayed the trust investors placed in him by fabricating performance figures and treating the hedge fund as if it were his own personal bank account,” SEC enforcement chief Linda Chatman Thomsen said.

The SEC said Trabulse raised about $10 million for his “hedge fund”, founded in 1997. According to account statements, the fund was doing extraordinarily well, though the SEC alleges “the statements he provided to investors bore no relation to the fund’s actual performance.”

“Trabulse encouraged his existing investors to serve as references for new investors,” Helane Morrison of the SEC’s San Francisco office said. “As a result, his false account statements not only lulled existing investors into believing their investments were hugely profitable, but lured new investors into the fund.”

The SEC complaint, filed yesterday in San Francisco federal district court, seeks disgorgement of ill-gotten gains, penalties and other relief.

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