A week after he was arrested and charged with securities fraud, four investors have sued hedge fund manager James Nicholson.
Nicholson, who ran Pearl River, N.Y.-based Westgate Capital Management, has been hit with a $1.5 million racketeering lawsuit, filed Wednesday by four residents of Rockland County, N.Y.
Nicholson has been accused by prosecutors and the Securities and Exchange Commission with misrepresenting the value of 11 hedge funds he ran, as well as using sales materials to boast of investment successes that, according to authorities, are entirely fictitious.
The lawsuit alleges as much, saying that Nicholson reassured one of the plaintiffs just two days before his arrest. He allegedly told Rosemary Doyle on Feb. 23 that business was going well and that the funds were profitable, if not quite as profitable as last year.
“In reality, at this time, Westgate’s financial condition was so perilous that numerous investors who had received requested redemption checks and saw those checks return for insufficient,” according to the lawsuit.
Nicholson remains in federal lockup in Brooklyn, unable to post $10 million bond.