Sunday, 26 June 2016
Last updated 2 days ago
Jul 7 2008 | 7:48am ET
Troubled hedge fund group Absolute Capital Management keeps finding more of it.
A U.S. fund of hedge funds has sued AbCap and its co-founder, accusing the latter of defrauding investors and the former of letting it happen.
Evergreen, Colo.-based White Peaks Asset Management sued the firm and Florian Homm, whose abrupt departure last year sent AbCap into a downward spiral, in Denver federal court last week. According to the suit, Homm “secretly steered” investor funds into pink sheets through a brokerage firm he owned half of.
After his departure from AbCap in September, investors learned that he had invested about $500 million in illiquid penny stocks, leading to many to seek redemptions and forcing the firm to suspend withdrawals and seek a restructuring of the funds.
“Homm’s transactions generated huge profits for Hunter” World Markets, the brokerage, “in a variety of ways, which in turn generated secret profits for Homm,” the White Peaks lawsuit alleges. White Peaks’ Cascade Fund had invested about $1.5 million in AbCap.
In addition, Homm “used investor money to prop up a penny stock in which he was beneficially a large personal shareholder.”
The lawsuit is not the first for either party. Another Coloradan, oil millionaire Jack Grynberg, sued Homm earlier this year, although the suit was dismissed. Three years ago, White Peaks successfully sued Tennessee firm, alleging it recklessly bet against Google shares.