Indicted Hedge Fund Manager Nicholson Pleads Not Guilty

Apr 28 2009 | 2:02am ET

Accused hedge fund fraudster James Nicholson pleaded not guilty yesterday to charges that he ripped investors off to the tune of $160 million.

Nicholson entered his plea in New York federal court. He was arrested in February after his alleged scheme collapsed under the weight of accelerating redemption requests, and was charged last week with securities and investment adviser fraud.

The founder of Pearl River, N.Y.-based Westgate Capital Management will be back in court in June. He faces up to 65 years in prison and a $6 million fine if convicted of the charges.

The Securities and Exchange Commission has also sued Nicholson and Westgate, alleging they misrepresented the value of the hedge funds, and used sales materials boasting of an allegedly false record of investment success.

According to the SEC complaint, at least one Westgate fund claimed positive returns in 98 of 99 consecutive months. Nicholson allegedly created a fictitious accounting firm and providing some of his investors with bogus audited financial statements. He apparently concocted this imposter firm under the name of an actual accountant while using his own telephone number and driver's license to set up a “virtual office.”

By late 2008, the Nicholson’s funds had sustained such losses that he could no longer honor redemption requests and hid his losses from investors with bogus sales brochures. He also closed one fund that was heavily invested in Lehman Brothers and folded its assets into another fund. In addition, he issued bad checks to some investors seeking to cash out, and ultimately suspended all investor redemptions due to what he called investors' “irrational behavior.”

In Depth

Financial Industry Blockchain Consortium R3 To Open-Source Platform Code

Oct 20 2016 | 9:03pm ET

Bitcoin's blockchain technology has spawned a flurry of activity among fintech startups...


U.S. Trust's Beard: The Rapid Growth of the Art Lending Industry

Oct 7 2016 | 10:55pm ET

Alternative investment managers have emerged as some of the most significant art...

Guest Contributor

Hedge Fund Marketing – Tips for Your Initial Sales Meeting

Sep 29 2016 | 5:46pm ET

There are two main goals a hedge fund should have for an initial in-person sales...