Ritchie Capital Settles Late-Trading Case

Feb 5 2008 | 12:30pm ET

Hedge fund Ritchie Capital Management and three employees have agreed to pay $40 million to settle a mutual fund late-trading case, the Securities and Exchange Commission said today.

Ritchie Capital allegedly operated an illegal late-trading scheme for almost three years, the SEC found, ending in September 2003.

“Ritchie Capital concealed its late-trading by receiving pre-4 p.m. time-stamps on its order tickets,” Merri Jo Gillette of the SEC’s Chicago office said. “The respondents’ attempt to cover their tracks by using falsified order tickets merely underscores the egregiousness of the fraudulent scheme.”

According to the SEC, Ritchie Capital made thousands of late trades on behalf of its Multi-Strategy Global Trading fund, netting it some $30 million in profit. The regulator charged that Ritchie Capital founder A.R. Thane Ritchie approved the scheme and oversaw its performance, and Warren DeMaio helped develop and supervise the strategy. Another employee, Michael Mauriello, actually placed the late trades with brokers.

All parties settled without admitting or denying the charges.

The fund and Ritchie Capital have agreed to pay a $30 million disgorgement and about $7.4 million in prejudgment interest. Ritchie Capital and Ritchie will pay $2.5 million, and DeMaio $250,000, in civil penalties.

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