US Judge Finds UK Hedge Fund Adviser Guilty Of Securities Fraud » Hedge Fund News From HedgeCo.Net Hedge Fund News

New York Judge Robert W. Sweet issued an Opinion in favor of the SEC finding that United Kingdom-based hedge fund adviser Pentagon Capital Management PLC (PCM) and Lewis Chester, PCM's Chief Executive Officer, engaged in securities fraud in violation of the Securities Act of 1933 and the Securities Exchange Act of 1934.

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The complaint alleges that PCM and Chester orchestrated a scheme to defraud mutual funds in the United States and their shareholders through late trading and deceptive market timing. PCM's advisory client, Pentagon Special Purpose Fund, Ltd., obtained approximately $62 million in illicit profits through this scheme, at the expense of U.S. mutual funds and their shareholders.

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Judge Sweet further found PCM and Chester, together with Relief Defendant Pentagon Special Purpose Fund, Ltd., PCM's advisory client, jointly and severally liable for disgorgement of $38,416,500 of profits from the U.S. mutual fund trades executed through TW&Co. plus prejudgment interest. Finally, Judge Sweet imposed civil penalties against Defendants in the amount of $38,416,500, equal to Defendants' pecuniary gain for late trades through TW&Co.