Tuesday, 29 July 2014
Last updated 8 min ago
May 6 2008 | 11:45am ET
The Securities and Exchange Commission has obtained an asset freeze and other emergency action to stop a $30 million hedge fund fraud allegedly perpetrated by San Diego-based Plus Money.
Starting four years ago, Plus Money and its principal, Matthew La Madrid, have managed hedge funds that raised more than $30 million from approximately 300 investors by telling them the funds would engage in a covered call options trading strategy, regulators say.
However, La Madrid allegedly abandoned the covered call trading strategy in the fall of 2007, emptied investor money from brokerage accounts and dispersed the money through a series of illicit transfers including to Vision Quest Investments, a La Madrid-controlled account, which in turn transferred $10 million to relief defendant Palladium Holding Co.
Palladium then allegedly transferred $5 million to its own brokerage account and used the funds to trade in numerous short-sell transactions involving Treasury bonds, depleting more than half of the account's value as of April 25. The SEC says it also wired $500,000 back to La Madrid, transferred $1.8 million to several real estate title companies, used $95,000 towards the purchase of two automobiles, and transferred another $90,000 to a Denver-based car dealership.
Plus Money failed to make monthly payments to the Premium Return Funds' investors beginning in February.
On April 28, the SEC filed an emergency action to stop the ongoing fraud and the U.S. District Court Judge for the Southern District of California, issued an order on April 30 freezing the assets of the defendants and the relief defendants.
The SEC’s complaint seeks preliminary and permanent injunctions, return of ill-gotten gains with prejudgment interest, and penalties against the defendants. The complaint also alleges that the defendants transferred significant amounts of investor monies to the relief defendants and seeks the return of those monies.
A hearing on whether a preliminary injunction should be issued against the defendants is scheduled for May 14.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…