New York hedge fund loses billions, owner faces criminal charges


Fraud is rampant in the securities industry. Given the amount of money in play in this realm, the stakes can be high, and those who are taken advantage of can suffer enormous losses. As heartbreaking as that can be, those who have been hurt by fraud should take comfort in knowing that legal options may be available to them.

New York hedge fund manager charged with fraud

Among those looking for help are those who were allegedly cheated out of billions of dollars by a famous hedge fund manager. The founder of Archegos Capital Management and the company’s chief financial officer were recently arrested for allegedly lying to banks and brokerage firms to increase the size of the hedge fund’s portfolio from $10 billion to $160 billion.

According to reports, the founder used the hedge fund, which was initially fueled by his own investment, to artificially inflate publicly held stocks, controlling major positions in just a handful of companies. as is typical in the industry, this fund utilized leverage which dramatically increases risk which can result in wild price fluctuations leading to large losses. In 2021, the use of leverage in the hedge fund resulted in a series of margin calls that eventually ended up costing the fund, and its investors, over $100 billion in market value.

As if the matter couldn’t get worse, the hedge fund allegedly had required many employees to submit a portion of their pay to the company for investment purposes, disguised as deferred compensation. These employees are also out millions of dollars.

The founder denies the allegations. His attorney claims that the charges are a threat to investors and that the evidence will show that there was no wrongdoing whatsoever.

What this case means for you

This case highlights the fact that those who engage in egregious behavior can’t escape the reach of the law. Although this case is criminal in nature and we’ll have to wait to see if anyone is eventually convicted of criminal wrongdoing, it’s also important to note that criminal cases do not result in compensating victims of securities fraud.

Finding accountability for financial fraud

If a criminal case involving securities fraud results in a conviction, such a result may be extremely helpful in establishing liability in a civil case brought by aggrieved investors.

This is because the burden of proof in a criminal case is higher, requiring prosecutors to prove guilt beyond a reasonable doubt. In a civil lawsuit, you only have to prove your case by a preponderance of the evidence, which means that you’ve proven your case to a standard of “more likely than not,” as opposed to the criminal law standard of “beyond a doubt.”

That also means that you shouldn’t give up hope just because criminal charges haven’t been levied in your case.

Don’t be turned away by the complexities of your case

Securities fraud cases can be complicated and downright confusing, especially when fraudsters utilize intricate strategies to cheat their investors. But an attorney who is experienced in this area of the law knows where to look for evidence of wrongdoing. He can also apply applicable law to the facts at hand to craft compelling and persuasive legal arguments. If you think that you could benefit from that kind of representation and you want to take a fraudulent investment professional to task, then consider enlisting the assistance of a skilled legal advocate.