SEC Charges Hedge Fund Billionaire Phil Falcone

As had been widely expected, the Securities & Exchange Commission on Wednesday filed securities fraud charges against hedge fund billionaire Philip Falcone and his firm, Harbinger Capital Partners. The civil enforcement action accuses Falcone of fraudulently taking out a $113 million loan from one of his hedge funds to pay his personal taxes and giving certain investors in his troubled hedge fund like Goldman Sachs the chance to cash out their investment while restricting redemtions for other investors. Those civil charges were widely expected to be brought ever since settlement negotiations between Falcone and the SEC dissolved over the regulators’ insistence that Falcone serve some sort of securities industry ban, which would have effectively ended his investment career. Read more in Forbes here.

Conoco fights MF Global trustee over $93.5 million

ConocoPhillips (COP.N) and MF Global Inc’s bankruptcy trustee are squaring off in a $93.5 million dispute that illustrates how hard it is to divvy up the assets of the failed brokerage, a Reuters analysis of a court filing shows. On Friday last week, the oil company — a longstanding MF Global (MFGLQ.PK) customer — filed an objection to the trustee’s treatment of its claim, calling his approach “flawed” and saying Conoco had not received the bulk of the distributions from its MF Global accounts to which it was entitled. More on Reuters [...]

Madoff’s Brother Sets Plea Deal in Ponzi Case

For nearly four decades, as the second-in-command at Bernard L. Madoff Investment Securities, Peter B. Madoff ran the family business alongside his older brother. On Friday, Peter Madoff — more than three years after his brother, Bernard, confessed to running a vast Ponzi scheme that swindled investors out of billions of dollars — is expected to appear in Federal District Court in Manhattan and plead guilty to criminal charges, according to prosecutors. He would be the first relative of Mr. Madoff’s to admit to wrongdoing in connection with the fraud. More in the New York Times [...]

SEC staff floats draft proposal on money funds

Top officials at the U.S. Securities and Exchange Commission are reviewing a draft proposal for controversial new reforms for the $2.6 trillion money market fund industry, according to people familiar with the matter. The draft proposal, which was formally circulated among commissioners late on Monday, outlines SEC Chairman Mary Schapiro’s vision for adding safeguards to the money market funds, one of those people said. More on Reuters here. [...]

FINRA’s new suitability rule looms, with expanded customer-information requirements

FINRA’s new suitability rule expanding customer information requirements and applying them to more transactions the is set to go into effect July 9, after delays requested by firms to get more time to adapt. The rules will require a broker dealer or their associated persons to have a “reasonable basis” to believe a recommended transaction is suitable for the customer, based on information obtained through “reasonable diligence” to understand a customer’s investment profile.”FINRA and representative broker dealers discussed the new rule in a New York panel last week at the Securities Industry and Financial Market Assosciation, that followed issuance in May of further FINRA guidance on how the rule should be applied, in response to member questions. More on Reuters [...]

Madoff Trustee Can’t Recoup Investments, Defendants Say

The liquidator of Bernard Madoff’s firm is barred by state and federal laws from taking back money invested with a brokerage, almost 300 defendants told U.S. District Judge Jed S. Rakoff in court papers. Madoff’s customers are entitled to interest, damages and opportunity costs in addition to their principal, and can keep deposits made in the two years before the con man’s Ponzi scheme collapsed, according to the joint brief filed in federal court in Manhattan. Rakoff has allowed the trustee, Irving Picard, to try to claw back fake profits received by investors during the two-year period. More on Bloomberg Businessweek [...]

U.S. SEC settlements with individuals on the rise

Aggressive efforts to combat insider trading a re helping U.S. securities regulators boost the number of settlements they reach with individual defendants, a new report has found. The U.S. Securities and Exchange Commission has settled 286 cases with individuals in the first half of its 2012 fiscal year, a pace that puts the agency on track for a 20 percent jump in individual settlements over fiscal 2011, an analysis by NERA Economic Consulting said. The report could help the SEC in its effort to be seen as a tough enforcement agency, especially after failing to catch convicted Ponzi swindlers Bernard Madoff and Allen Stanford. Read Reuters report here. [...]

A Con Man Who Lives Between Truth and Fiction

“I’m a proven liar. Don’t believe anything I say.” That was what Samuel Israel III told me last week. He is the hedge fund manager convicted of running a $450 million Ponzi scheme who faked his own suicide in the summer of 2008 to avoid his prison sentence before turning himself in after a worldwide manhunt. He was sitting across from me in the visiting center of the Butner prison complex, about 45 minutes north of Raleigh in eastern North Carolina. (Bernard L. Madoff is in the same complex.) Read New York Times report here.

Madoff Trustee May Get Picower’s $5 Billion as Appeal Shelved

The liquidator of Bernard Madoff’s firm may gain access to $5 billion from investor Jeffry Picower’s estate to pay defrauded customers after an investor lawyer said he wouldn’t appeal the key court ruling allowing it. Jim Beasley, an attorney who represented Madoff investor Adele Fox, said today in an interview he wouldn’t challenge a decision allowing Madoff trustee Irving Picard access to the funds. Picard said today that he may be able to access the money by July 16 if there are no further challenges. More on Bloomberg here. [...]

Supreme Court Declines to Hear Madoff Dispute

The Supreme Court said on Monday that it would not hear a dispute over how the claims of investors in Bernard L. Madoff’s huge Ponzi scheme should be calculated, a decision that could speed up payouts to the victims of the fraud. Without comment, the court declined to hear an appeal from Madoff customers who argued that the bankruptcy trustee, Irving H. Picard, should base victim claims on the final statements they received from Mr. Madoff in November 2008. That method would have pegged the total losses at $60 billion. Read New York Times report [...]