In two cases filed yesterday in the Southern District (see here and here), the SEC brought fraud charges against prominent hedge fund manager Philip Falcone and his firm, Harbinger Capital Partners, LLC. The SEC’s website summarizes the charges as follows:
●Falcone fraudulently obtained $113.2 million from a hedge fund that he advised and misappropriated the proceeds to pay his personal taxes; ●Falcone and two Harbinger investment managers through which Falcone operated manipulated the price and availability of a series of distressed high-yield bonds by engaging in an illegal “short squeeze;” ●Falcone and Harbinger secretly offered and granted favorable redemption and liquidity rights to certain strategically-important investors in exchange for those investors’ consent to restrict redemption rights of other fund investors, and concealed the arrangement from the fund’s directors and investors; and ●Harbinger engaged in illegal trades in connection with the purchase of common stock in three public offerings after having sold the same securities short during a restricted period.
The cases are before Judge Crotty. The complaints have been widely covered in the press (see, e.g., Reuters, WSJ, NY Mag, NYT, Business Week).