Wynnefield Fundraising After Founder Beats Insider Trading Rap

Jul 24 2014 | 10:31am ET

Its founder cleared of insider-trading charges, Wynnefield Capital is wasting no time getting back to business.

The New York-based hedge fund, which closed to new investment earlier this year, just before the civil trial of founder Nelson Obus began, reopened all but immediately after he was found not liable by a jury at the end of May. The day after the verdict, the firm accepted a $425,000 investment.

A month afterwards, on June 30, the small-cap specialist formally began a fundraising push to add $110 million to its $340 million asset base. The firm, which imposes a two-year lockup, has already netted $5 million, Hedge Fund Alert reports.

If the fundraising drive is successful, Wynnefield will be bigger than ever: The firm suffered only $25 million in redemptions after it was subpoenaed by the Securities and Exchange Commission eight years ago—most of it from a single institutional investor. The fund has posted double-digit returns in each of the past two years and is up 11.5% this year.

The SEC had accused Obus of earning Wynnefield $1.3 million on a 2001 trade based on a tip received by his analyst, Peter Black, from a friend. Obus’ lawyers countered that, if true, their client was the “lamest insider-trader in history.”

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