UBS’ hedge fund administration business has settled civil charges that it overlooked fraud at a hedge fund client.
UBS Fund Services will pay $19 million to settle a case brought by the court-appointed receiver for defunct hedge fund Philadelphia Alternative Asset Management, which collapsed in 2005.
The King of Prussia, Pa.-based firm’s president, Canadian Paul Eustace, was indicted in November on commodities fraud charges, relating to a scheme in which he allegedly defrauded investors of $200 million in a shell game designed to hide investment losses.
In settling, UBS Fund Services did not admit or deny the charges. The case had been scheduled to go to trial on Jan. 22.
In December, PAAM’s receiver struck a deal with the hedge fund’s former futures broker, MF Global, the former Man Financial, which spun off from Man Group last year. MF Global agreed to pay $75 million.
The two settlements, plus $75 million in recovered assets, have led to an “extraordinary” level of recovery for PAAM investors, the receiver said.
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