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IFA's Ever-Expanding Hedge Fund Manager Hall of Shame

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Last year, Index Fund Advisors inaugurated its Hedge Fund Manager Hall of Shame. Since then, quite a bit has happened with what Forbes called The Sleaziest Show on Earth.

On September 8th, Mathew Martoma of Steven A. Cohen’s SAC Capital (now called Point72 Asset Management after a guilty plea for insider trading) received a nine-year prison sentence for his role in one of the largest insider-trading schemes ever. The evidence against him was overwhelming, so the fact that he did not plead guilty and cooperate with prosecutors strongly suggests that he was protecting somebody above him. We will leave it at that.

There seems to be no end to the creativity in how certain miscreant hedge fund managers swindle their investors. The Securities and Exchange Commission (SEC) recently charged Steven R. Markusen and Jay C. Cope of Archer Advisors LLC with bilking their investors out of more than $1 million by charging them for fake research expenses. They also misled their clients by artificially pumping up the price of a thinly-traded stock (cyberOptics Corp.) that made up over 75% of their portfolio. The pumping occurred at the end of the month which allowed them to report higher returns to their investors as well as bill them for higher amounts.

Compared to Albert Hallac of Weston Capital Asset Management LLC, these guys are pikers. The SEC has charged him and a few associates with misappropriating $17 million of investor funds to a consulting firm (Swartz IP Services Inc.) which kicked back about $4.2 million of the proceeds.

As we come across more shenanigans from the world of hedge funds, we will update our Hall of Shame. Stay tuned.