In the latest twist in the federal racketeering case against Minnesota businessman Tom Petters, federal authorities say a hedge fund manager who claimed to be the biggest victim of Petters' alleged Ponzi scheme was actually a participant in it.
The Securities and Exchange Commission on Friday accused Illinois financier Greg Bell and his company, Lancelot Investment Management, with fraud. In charges filed in U.S. District Court in Minnesota, the SEC also moved to freeze Bell's assets, which include millions of dollars stashed in Swiss bank accounts in the names of Bell and his wife, Inna Goldman.
Separately, Bell was arrested Friday in Highland Park, Ill., and was taken to the Anoka County jail, according to Ron Peterson, a trustee for Lancelot's investors. A criminal complaint against Bell in U.S. District Court in Minneapolis was sealed, but Peterson said the fund manager could appear in court as early as Monday.
The Pioneer Press:
For more than a decade, Petters claimed his Petters Co. Inc. unit arranged to buy overstock consumer electronics and other merchandise for resale to retailers such as Wal-Mart and Costco, the SEC said in its complaint. The firm sought investor money because it purportedly paid for inventory up front and couldn't collect until delivery. It said transactions took about 180 days, according to the SEC.
In reality, there were no purchases or sales, and money raised by selling notes to investors was repaid by selling more notes, the SEC said. As of September, Petters Co. and its affiliates owed about $3.5 billion.
Bell formed Lancelot Investment Management in 2001 and had raised $2.62 billion from hundreds of investors, including pension plans and other hedge funds, by the time the Ponzi scheme collapsed, the SEC wrote in its complaint. "Virtually all" of the money had been steered to Petters Co., the complaint said.
Lancelot owned about $1.5 billion in promissory notes when the fraud unraveled, prosecutors said Friday in a criminal complaint. They "are now of little or no value," the complaint said.
SEC press release here.
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