Two Probes Into Hedge Fund Southridge

Oct 8 2009 | 1:26am ET

A Connecticut hedge fund that specializes in private investments in public equity is the subject of a pair of probes into alleged market-manipulation.

Southridge Capital Management is the subject of a pair of probes, one by the Securities and Exchange Commission and the other by the Manhattan district attorney. According to Forbes, the SEC has subpoenaed a pair of companies that have accused Southridge of manipulating their thinly-traded shares. Both companies had received financing from the hedge fund.

The Manhattan D.A. is also looking into the firm. The Ridgefield, Conn., Police Dept. searched Southridge’s office at the behest of the Manhattan authorities, Bloomberg News reports.

Southridge said it is “cooperating fully with authorities.”

The two companies, Hyperdynamics Corp. and Vyta Corp., subpoenaed by the SEC sued Southridge in 2001, accusing it of manipulating their share prices. Vyta has since ceased operations. A lawyer for both companies, James Christian, who also represents two other companies that have sued Southridge, told Forbes, “from the nature of the document requests, they are looking into trading patterns with respect to Southridge, and they are looking at what Southridge Capital promised companies with regard to certain financings versus what actually happened.”

The SEC subpoena reportedly is seeking documents related to cash transfers between the companies and Southridge’s hedge funds, as well as documents related to securities they issued Southridge and any communications between them.

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