Manager Accused of “Cooking the Books” Facing Civil and Criminal Fraud Charges From SEC and DOJ

Valuation remains a critical fault line for fund managers and the subject of unrelenting regulatory scrutiny. The SEC recently filed a civil complaint against a hedge fund manager and three of its principals, alleging that, as the performance of the manager’s funds faltered, the defendants used inflated marks from a friendly broker and unauthorized valuation mechanisms to increase the value of the bonds in the funds’ portfolios. On the same day, the DOJ unsealed an indictment charging the three individual defendants with four counts of securities fraud, wire fraud and conspiracy to commit those offenses. This article details the civil and criminal charges and the circumstances giving rise to them. See “Three Approaches to Valuing Fund Assets and How Auditors Review Those Valuations” (May 11, 2017).

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