A hedge fund manager in Beverly Hills, California, bilked investors out of about US$44 million while claiming annual returns of as much as 60 percent, US prosecutors said.
Bradley Ruderman, 46, was taken into custody on Friday morning after he surrendered to federal agents, US Attorney Thomas O’Brien said in a statement.
Ruderman, the founder and manager of Ruderman Capital Partners, faces as long as 20 years in prison if convicted of wire fraud, according to the statement.
The fund manager raised US$44.3 million over the past eight years from 22 investors, mostly family members, according to the statement. Ruderman sent a letter to the investors last month saying the funds were almost depleted, prosecutors said.
Ruderman spent US$8.7 million of the money on personal expenses, including two Porsches and US$5.2 million he lost in clandestine poker games, prosecutors said.
The Securities and Exchange Commission (SEC) sued Ruderman on April 30 and got an emergency court order freezing his assets.
Ruderman falsely claimed that Lowell Milken, chairman of the Milken Family Foundation, and Oracle Corp chief executive officer Larry Ellison were investors in his funds, the SEC said.
He also made at least one Ponzi-like payment earlier this year when an investor sought to withdraw US$750,000 and Ruderman transferred funds raised from two new investors, the SEC said.
Ruderman was released on US$500,000 bail on Friday afternoon, FBI spokesman Laura Eimiller said in an e-mailed statement.
UK ARRESTS TWO
Meanwhile, Britain’s Serious Fraud Office (SFO) arrested two men on Friday in a probe into collapsed hedge fund Weavering Capital, which it said used swaps to artificially inflate its value.
The watchdog searched two houses in Kent and Surrey, and the two men, aged 43 and 45, were taken to a police station for questioning, it said.
An SFO spokesman declined to name the two, the first arrests of hedge fund managers in the UK since the start of the credit crisis. No further arrests were expected for the moment.
Liquidators to the Weavering Macro Fixed Income hedge fund were appointed in March after the firm told investors it had unearthed a large interest rate swap position where the counterparty was a firm related to Weavering.
The investigation is focused on the swaps, which “inflated the apparent net asset value of the Macro fund,” and were between the fund and a company registered in the British Virgin Islands, Weavering Capital Fund Limited, the SFO said.
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