New York Hedge Fund Manager Guilty Of Fraud

Nov 14 2007 | 2:01pm 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

Don’t Overlook These 6 Hybrid Cloud Concerns

Sep 14 2017 | 6:27pm ET

Cloud-based technology solutions have made tremendous inroads into the alternative...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Cash: An Asset In Adolescence

Aug 31 2017 | 3:34pm ET

If the investment industry has a rebellious teenager in the house today, that teenager...

 

From the current issue of