Real Estate Hedge Fund A Fraud, Mass. Says

May 22 2008 | 2:00am ET

It’s been a busy week for William Galvin: The Massachusetts secretary of the commonwealth has charged a second hedge fund manager with wrongdoing, this time alleging outright fraud.

Galvin’s office has charged Stephen Lewis Hochberg with defrauding investors of as much as $1.6 million in a phony real estate hedge fund. Earlier this week, Galvin charged another Massachusetts man with soliciting improper investors.

According to investigators, Hochberg sold investors a pack of lies, promising returns in excess of 8% annually in his Realty Funding hedge fund. He also claimed the fund managed about $8.6 million.

In fact, Galvin said, Realty Funding does not appear to have “existed as an entity separate and distinct from Hochberg himself.”

“Hochberg apparently used these funds to pay for personal expenses,” Galvin said.

Hochberg allegedly didn’t spend it all on himself: Investigators say Realty Funding/Hochberg was something of a Ponzi scheme, as well, enticing clients to invest more with payouts of phony profits, as well as to settle with at least one investor who threatened to sue.

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