Utah Hedge Fund Charged With $60M Fraud

Mar 5 2008 | 1:00am ET

A Utah hedge fund firm and its trio of principals have been charged with defrauding investors of $60 million.

The Securities and Exchange Commission said that Salt Lake City-based Thompson Consulting misled investors about the nature of its investments and misappropriated funds. The regulator also charged principals Kyle Thompson, David Condie and Sherman Warner, alleging that each made sales pitches to potential investors, including many elderly.

According to the SEC, Thompson Consulting in March of last year began to ratchet up the risk in its portfolio—without informing investors—as it struggled to meet its promised 36% annual return. But its efforts only made matters worse: The firm wrote options on New Century Financial Corp. stock, only to see New Century’s share price collapse amid the subprime squeeze. Thompson Consulting then poured what was left of its assets into unhedged options on the Chicago Board Options Exchange’s volatility index just in time for the market collapse in August.

The fund lost more than $50 million in the first two-and-a-half weeks of August, leaving it with just $200,000.

The SEC also alleges that Thompson Consulting transferred $3 million of the hedge fund’s assets to an individual client’s account, to cover up losses suffered on the New Century options.


In Depth

Exotic Assets: Investing In Rare Violins

Jan 17 2017 | 4:43pm ET

By definition, alternative investments include exotic assets far beyond your typical...

Lifestyle

'Tis the Season: Wall Street Holiday Parties Back In Fashion

Dec 22 2016 | 9:23pm ET

Spending on Wall Street holiday parties has largely returned to pre-2008 levels...

Guest Contributor

DarcMatter: The Top Trends in Alternative Investments for 2017

Jan 13 2017 | 8:22pm ET

The $7 trillion alternative investments industry is poised for continued growth...

 

From the current issue of

The U.S. Commodity Futures Trading Commission (CFTC) ordered The Goldman Sachs Group Inc., and Goldman, Sachs & Co. to pay a $120 million penalty for attempted manipulation and false reporting of ISDAFIX Benchmark Rates, a global benchmark for interest rate products.