Petters-Linked Hedge Fund Manager’s Bail Revoked

Jul 23 2009 | 2:26am ET

The Illinois hedge fund manager charged with fraud in connection with the Thomas Petters Ponzi scheme scandal won’t be freed on bail, after all.

A federal judge has decided that Gregory Bell is a flight risk and ordered him jailed until his trial on charges that he helped Petters cover up his alleged $3 billion scam with a series of fraudulent transactions. Prosecutors argued that a $15 million offshore trust in Switzerland gives Bell, a Russian native, the means to flee.

“The preponderance of evidence shows that Mr. Bell is a flight risk,” assistant U.S. Attorney Timothy Rank told U.S. District Judge Michael Davis in Minneapolis, Minn. “What really matters is that the money is there and that Mr. Bell, in a knowing, calculated way, decided to put himself in the situation.”

Bell’s attorney countered that his client doesn’t even have a passport, but to no avail.

Last week, a magistrate judge granted Bell $1.5 million bail with home monitoring, but prosecutors appealed the decision.

According to the Securities and Exchange Commission, Bell’s Lancelot Investment Management steered more than $2 billion—nearly all of the money it raised—to Petters, earning millions of dollars in “fraudulent fees.” The complaint charges Lancelot and Bell with wrongfully withdrawing more than $40 million from the five Lancelot funds—which have since filed for bankruptcy—in purported fees in the months before Petters’ alleged scam was exposed.

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