SEC Sues Pentagon For Defrauding Mutual Funds

Apr 4 2008 | 2:00am ET

Last week, Pentagon Capital Management announced it would close shop in expectation of a regulatory complaint. Yesterday, that complaint came.

The U.S. Securities and Exchange Commission filed suit against the London-based hedge fund, which manages £1.1 billion (US$2.2 billion), and its CEO for allegedly improper mutual fund trading practices.

According to the SEC, Pentagon defrauded U.S. mutual funds through a late-trading and market-timing scheme it ran from about June 1999 to September 2003. The regulator said the firm’s Special Purpose Fund earned some $62 million in ill-gotten gains, with Pentagon and CEO Lewis Chester reaping the incentive fees.

“PCM actively traded U.S. mutual funds through Pentagon Fund’s accounts at numerous broker-dealers in the United States,” the complaint, filed in federal court in New York, said.

Lawyers for Pentagon say they will demonstrate their clients’ innocence in court.

RELATED STORIES

Pentagon To Close After SEC Files Charges


In Depth

Dillon Eustace: The Advantages of ICAVs

Feb 11 2016 | 7:51pm ET

As the growth of alternative investment vehicles continues, global asset managers...

Lifestyle

Citadel's Ken Griffin Donates $40M To New York's Museum of Modern Art

Dec 22 2015 | 9:23pm ET

Citadel founder Ken Griffin has donated $40 million to New York’s Museum of Modern...

Guest Contributor

Hedging Against Reputational Risk in the 21st Century

Feb 12 2016 | 7:18pm ET

For investors, the first step in researching a new fund or manager is to google...