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Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Saturday, October 10, 2009

Chicago Hedge Fund Manager Pleads Guilty to Wire Fraud in Connection with Ponzi Scheme

The SEC announced that on October 7, 2009 the United States District Court for the District of Minnesota accepted a guilty plea by former Chicago-area hedge fund manager Gregory Bell to one count of wire fraud. Bell is one of the defendants in a pending civil injunctive action filed by the Commission on July 8, 2009 in which the SEC charges another defendant, Minnesota businessman Thomas Petters, with fraud for perpetrating a massive Ponzi scheme from 1995 to September 2008 through the sale of notes related to consumer electronics. In 2001 Bell formed an investment company Lancelot Investment Management, LLC, also a defendant in the Commission's lawsuit. From 2002 to 2008 Bell and his investment company raised over $2.62 billion from hundreds of investors through the sale of interests in hedge funds they managed. The Commission's Complaint alleges that Bell in turn invested almost all of these assets in notes sold by Petters, falsely assuring investors that he was taking steps to protect their money and to verify the underlying transactions. The Complaint alleges that when Petters's scheme began to unravel, Bell participated in a series of sham transactions to conceal that Petters owed more than $130 million in investor payments on the notes. Bell and Lancelot Management also withdrew more than $40 million in fees from the hedge funds during the final months before Petters's scheme collapsed. On July 24, 2009 the Court entered a Preliminary Injunction that, among other things, froze all assets of Lancelot Management, Bell and Bell's wife, who is a relief defendant, and required an accounting of their assets and liabilities including all funds and assets received from Petters's notes and/or the hedge funds.

http://lawprofessors.typepad.com/securities/2009/10/chicago-hedge-fund-manager-pleads-guilty-to-wire-fraud-in-connection-with-ponzi-scheme.html

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