New York Hedge Fund Manager Guilty Of Fraud

Nov 14 2007 | 1:01pm ET

A U.S. District Court judge has found New York-based hedge fund Cornerstone Capital Management and its chief executive officer, Joseph Profit, guilty of fraud.

The Commodity Futures Trading Commission announced today that the judge has entered a permanent injunction against the firm. The ruling stems from a complaint filed by the CFTC on Jan. 31 charging that Cornerstone, a registered commodity pool operator and commodity trading adviser defrauded investors in the Icon Fund, a purported hedge fund.

Profit was found liable for defrauding existing and prospective investors by lying about Icon’s returns, which were inflated to 42.18% in 2005 and 20.74% in 2006. The order found that the fund was never profitable, and that its CEO lost in excess of $1 million due to trading losses and personal withdrawals, which he spent on non-investment activities such as meals, golf outings, airline tickets and lodging.

Profit also inflated the fund’s assets under management from $3.2 million to $50 million when he reported them in various databases and to hedge fund information providers. In addition, the order finds that he prepared and delivered to at least one investor a phony audited financial statement for the fund, which represented that the hedge fund had net assets of $14.8 million as of Dec. 31, 2005, and returns in excess of 20% between Oct. 1, 2004 and Dec. 31, 2005.

Finally, Profit also hid material information from the National Futures Association and failed to submit to the NFA a required 2005 annual report for the Icon Fund.

The order permanently enjoins Profit from further violations and requires Cornerstone to pay restitution and civil monetary penalties, the amounts of which will be determined after the court-appointed receivership in the case is completed.


In Depth

Q&A: Pantheon’s McCrary Says Private Equity Market ‘Robust’

Dec 17 2014 | 8:32am ET

Dennis McCrary is a partner at Pantheon, a private equity firm with $32.2 billion...

Lifestyle

Cohen Donates $1.5M To GOP Governors Association

Dec 10 2014 | 7:13am ET

The Republican Governors Association raised close to $25 million from October 1...

Guest Contributor

Q&A With Daniel Gallancy: Institutional Interest In Bitcoin Is Growing Steadily

Dec 12 2014 | 7:54am ET

Daniel Gallancy is founder and CEO of SolidX, a provider of total return swaps for...

 

Sponsored Content

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

December 2014 Cover

Futures 2014 person of the year

Jeff Sprecher was simply looking for a platform to trade energies when launching ICE 14 years ago but it has grown to reach the pinnacle of both the listed futures and equities world.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.