I have some personal connections to a hedge fund in Denver that recently got busted for running a ponzi scheme. It's small beans compared to NYC, but it's still pretty bad. The initial reports from the media is that the fund manager had been running this for over a year. But when I sat in with one of the PM's he was making trades, and running his own book. I don't really know my hand from my as when it comes to trading volatility or whatever their strategy was, but how could that be possible when this PM was saying that he made a certain 20% percent on his book last year? Was he in on it too? Or is the media full of shit & it was likely a couple bad trades that torpedoed the fund?
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You can't run a fund and NOT trade AT ALL.... that'd be pretty freaking obvious to even the worst SEC investigator. It's totally conceivable to be running a fund and actually investing, but simply falsifying your returns and taking a little off the top... a ponzi scheme doesn't mean you stole ALL the money - just enough to get by.
He also claimed that none of the employees knew about it. Is that possible? If you're making trades for the fund wouldn't you know the monetary position it was in?
More common than you might think:
http://today.msnbc.msn.com/id/36147685/ns/today-today_people/?GT1=43001
Any idea on how much he wound up with and what kind of charges he's looking at?
Here's the WSJ article on it
http://online.wsj.com/article/SB100014240527487036483045752126028045265…
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