Defrauded Hedge Fund Investors to Get Their Money Back

Jack Humphrey, Regulatory journalist
June 29, 2011 /

Following a court order obtained by the Securities and Exchange Commission against a fund manager, investors who lost $230 million to a hedge fund that held their money offshore have finally been assured to get back what is due them.

Although the sum remains frozen, awaiting completion of the SEC’s Ponzi scheme lawsuit against Francisco Illarramendi of Connecticut and his Highview Point Partners LLC, David Bergers, Director of the SEC’s Boston Regional Office, said the securities regulator is “pleased with the return of this money to the U.S. and believe it will help preserve these assets for the benefit of defrauded investors.”

The SEC said in a filing with the U.S. District Court for the District of Connecticut that a total of $230 million held in an offshore account by the hedge fund manager has been returned to the US. The amount was received last week and is being held in a bank within the US.

Highview Point Master Fund, Ltd., Highview Point Offshore, Ltd., and Highview Point LP, Michael Kenwood Asset Management LLC, Michael Kenwood Energy and Infrastructure LLC, and MKEI Solar LP, were named as relief defendants for allegedly receiving investor funds “to which they have no right”.

In January 2011, the US District Court for the District of Connecticut granted an order allowing the SEC to freeze the assets of Illarramendi and his investment advisory firm, Michael Kenwood Asset Management LLC, after he directed to his bank accounts more than $53 million in hedge fund from the total $540 million in assets of investors who have put their money in the fund.

Similarly in March this year, the hedge fund manager faced related charges from the SEC and Connecticut’s US Attorney’s Office for trying to mislead authorities in the course of the investigation.

The SEC claimed then that the hedge fund manager tried to mislead its staff in the course of the investigation from December 2010 to January 2011 by providing them with a false letter professed to be coming from an accountant based in Venezuela.

Ethiopis Tafara, Director of the SEC’s Office of International Affairs, said: “In this case, the ability to freeze and repatriate the alleged financial crime proceeds was critical to the SEC’s effective enforcement of the U.S. securities laws.”

After an evidentiary hearing, Janet Bond Arterton, the US district judge for the District of Connecticut, ruled on June 16 that the assets of three hedge funds be frozen and ordered that all assets of the funds, including $230 million held in an offshore account, be returned to the US.

In addition to preliminary emergency relief, the SEC seeks permanent injunctions, disgorgement of ill-gotten gains plus interest and penalties from the defendants, and disgorgement plus interest from the relief defendants.

Last year, the SEC returned more than $2.2 billion to defrauded investors through financial recoveries in SEC enforcement actions.


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