Accused hedge fund fraudster Paul Eustace and his collapsed shop have been ordered to pay almost $300 million in restitution and fines for swindling investors out about $200 million.
Eustace consented to a federal court order than he pay $279 million in restitution and $12 million in fines, the Commodity Futures Trading Commission, which brought the charges, said. His firm, Philadelphia Alternative Asset Management, which regulators shut down in 2005, was ordered to pay an $8.8 million fine. PAAM may also be on the hook for $276 million in restitution if, as expected, Eustace is unable to pay.
PAAM collapsed three years ago after regulators froze its assets, accusing Eustace of creating phony account statements to hide some $200 million in losses and misappropriated assets, including $1 million in gifts to his girlfriend, among them breast enhancement surgery.
The $70 million that regulators seized when PAAM was shuttered and another $96 million recovered by the firm’s receiver will partially offset the restitution ordered. UBS and MF Global have also settled with the receiver, netting an additional $94 million. But the receiver says it does not expect to get anything out of the court order.
“We don’t expect to recover additional money in the near term as a result of this order,” Keith Dutill, a lawyer for the receiver, told the Financial Times. Eustace is unable even to afford his own attorney, and has had a public defender appointed for his upcoming criminal case.
Eustace faces two counts of commodities fraud. The U.S. Attorney’s Office in Philadelphia is attempting to compel Eustace, a Connecticut native currently residing in Oakville, Ontario, to return to the U.S. for trial.
“We are making efforts to have Mr. Eustace return to the U.S. to face our charges,” A spokeswoman for the prosecutor’s office told the Globe and Mail.