Hedge Fund News Wrap: Week Ending 8/15/14

Banks Seek 7-Year Push For Volcker Rule

Big banks and a number of lawmakers are pushing the Federal Reserve to grant waivers that could give banks an additional sevenfinance1 years to fully comply with the Volcker Rule–a key provision of the 2010 Dodd-Frank Law, which limits the alternative investment activities of big banks.

Over the past few years, banks have started to wind down their alternative investment units by selling or spinning them off, as well as decreasing their own investments.

ValueWalk cites Goldman Sachs Group Inc., JPMorgan Chase & Co., and Morgan Stanley as the banks who will be the most affected by the Volcker Rule, as they are the biggest players in alternative investments.

According to FINalternatives, the process should be completed by summer 2015. However, the Federal Reserve can allow two one-year delays, and an additional five-year delay for illiquid private equity and venture capital funds.

This is supposed to be a regulatory option in special circumstances,” said Marcus Stanley, Policy Director for Americans for Financial Reform. “It’s not supposed to be an automatic permission for every bank to get a 12-year period after passage of Dodd-Frank to divest from venture funds.”

 

See detailed coverage from:

FINalternatives

ValueWalk

The Wall Street Journal

 

 

 

SEC Reviews Valeant and Ackman Bid for Allergan

The Securities and Exchange Commission is investigating Valeant Pharmaceuticals and Pershing Square Capital over its takeover bid of Allergan. The probe comes a week after Allergan filed a lawsuit against Valeant Pharmaceuticals and Pershing Square Capital over allegations of insider trading and other securities laws violations in connection with their takeover bid.

According to the Wall Street Journal, the SEC prohibits anyone with advance knowledge of an impending tender offer from buying up shares of the intended target. The rule is meant to protect companies from being cornered by a hostile buyer on one side and prepositioned allies within shareholder ranks on the other.

Pershing Square accumulated a 9.7 percent stake in Allergan earlier this year, with the understanding that Valeant would seek to buy the company. However, both companies contend that their actions were legal.

There is nothing illegal, unethical or improper in taking a toehold position before a merger is proposed, even if it is not wanted by the target’s management. We welcome the SEC’s review of the facts,” Pershing Square said in a statement.

Allergan has not released a statement.

 

See detailed coverage from:

DealBook

The Wall Street Journal

Business Insider

 

 

Father and Son Plead Guilty to Madoff-Tied Hedge Fund Scam

A former associate Dean from MIT Sloan, and his son who is a Harvard Business School graduate, will plea guilty to criminal charges for running a hedge fund scam that was closely tied to Bernie Madoff’s Ponzi scheme.

According to USA Today, the hedge fund, GMB Capital, has lost more than $140 million in investors’ money. The pair, Gabriel and Marco Bitran will plea guilty two years after reaching a $4.8 million settlement on civil fraud filed by the Securities and Exchange Commission.

The duo are expected to face at least five years in prison and $10 million in forfeiture if the plea agreement is accepted by a federal court judge in Massachusetts.

Prosecutors state that the suspects took in $500 million from investors between 2005 and 2011 by falsely promising that client money “would be invested according to a complex mathematical trading model developed by Gabriel Bitran (father) and based upon his MIT research on optimal pricing theory.”

The hedge fund also falsely claimed that clients would see an average annual return of 16 to 23 percent with no down years.

While conducting their investigation on the December 2008 collapse of Madoff’s scam, SEC investigators learned about the Bitran’s business in 2009 and requested documents showing financial performance claims. The hedge fund used false statements and fabricated records.

We have mislead a lot of people with a range of statements that were incorrect simply to increase our income. …A person with the experience and knowledge of financial sector and a veteran professor of MIT should not have engaged in this type of behavior,” wrote Gabriel Bitran in a 2009 e-mail to his son. “The penalty for this type of action is Full restitution, which obviously we cannot afford.”

In response, his son Marco Bitran wrote, “We are certainly sharing equally in this dad. …Lots of problems were caused by my good intentions but very poor actions when it came to true honesty.”

 

 

See detailed coverage from:

MarketWatch

USA Today

FINalternatives

 

 

 

Hedge Fund Billionaire and Canadian Magnate Feud Over Island

Hedge fund billionaire Louis Bacon has filed a lawsuit against Canadian magnate Peter Nygard, citing a long history of defamation and ecological damage connected to Nygard’s reconstruction of his beach-front home.

Bacon, who is the chairman and chief executive officer of Moore Capital Management, is asking a Manhattan court to grant him access to recordings that will allegedly prove that Nygard ran a “smear campaign” against him with fake videos.

The smear campaign is intended to disparage, intimidate, and ultimately drive Mr. bacon away from the Bahamas,” Bacon claimed in a filing in Manhattan federal court.

According to Bloomberg News, Bacon will use the evidence in the video tapes in five defamation and two environmental lawsuits pending in Bahamian courts. Some of the videos portray Bacon as an insider trader, murderer, and member of the Ku Klux Klan.

Richard Good, a lawyer for Nygard, said in a statement that Bacon’s filing is part of a “10-year battle” that has touched on Nygard’s 2010 applications to the Bahamian government for permits tied to reconstruction of his home, which was allegedly destroyed by a fire.

According to CBC, the Canadian clothing executive rejected environmental claims in July over his property by a group of landowners, which include actor Sean Connery, and Robert F. Kennedy Jr., as well as Bacon’s “Save the Bays.”

 

See detailed coverage from:

DealBook

ValueWalk

Bloomberg News