Federal Court Freezes Assets Of 'Hedge Fund'

Apr 30 2008 | 12:13pm ET

If it looks like a $7 billion hedge fund with returns in excess of 1,800% on a compounded basis for the past 10 years, then it must be… a scam. 

A federal court in New Jersey has entered a statutory restraining order against fraudster Robert Sucarato and his New York Financial Company for allegedly conning investors out of some $1.5 million.

Sucarato allegedly solicited five individuals to invest in the NYFC Diversified Strategic Fund and the NYFC Strategic Fund claiming that they managed a total of $7 billion in assets since 1993 and that they routinely outperformed the market, achieving a 10-year compounded return exceeding 1,800% using a variety of instruments, including commodity futures and options.  

However, Sucarato allegedly falsified audit reports about the firm’s assets and performance reports to investors about the fund’s positions when, in fact, he held commodity futures and options trading accounts in his name only and sustained net losses almost every month he traded. To the extent that he did not use investors’ funds to trade in his personal commodity futures and options accounts, “the disposition of the participants’ funds is unknown,” according to the Commodity Futures Trading Commission.

And since April 2007, investors who demanded that Sucarato liquidate their accounts and return their funds were issued checks that bounced.

The CFTC is seeking a permanent injunction against Sucarato, disgorgement, restitution, and civil monetary penalties. The court has set a hearing on the CFTC’s request for a preliminary injunction for May 8.

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