Hedge Fund Collapse

Memphis, TNMore and more investors are losing money as their hedge fund investments collapse. Some have lost hundreds of thousands of dollars after they made investments based on misleading information from hedge fund managers and other financial advisors. Investors are now filing lawsuits, alleging they lost a lot of money because of unethical financial advisors.

Recently, a hedge fund manager was convicted of swindling investors out of $450 million. According to The Daily News the manager, Samuel Israel III, set up a hedge fund enterprise, Bayou Group, whose investments were recommended by Consulting Services Group (CSG). CSG, who recommended the hedge fund enterprise to pension plan trustees for UT Medical Group Inc., now faces a lawsuit on behalf of UT alleging it breached its fiduciary duty.

According to the lawsuit, Bayou was Ponzi scheme, in which money lost by Bayou principals was replaced with money invested by new investors. Based on CSG's recommendation, UT invested $1.6 million in the Bayou fund in 2002 and another $400,000 in 2003.

Meanwhile, more information is coming out about the former Bear Stearns hedge fund managers who were recently arrested for securities fraud. According to Newsday, the managers' actions led to investors losing nearly $2 billion.

The two men allegedly lied, in an act known as "skin in the game" by telling investors that they had their own money in the investments. Telling investors that they have their own money in an investment is a huge confidence boost for the investors because it shows that fund managers believe a fund is safe. Of course, the managers did not have money in the funds; one of the managers withdrew $2 million from the funds.

According to the indictment, the two managers lied to investors, claiming that the hedge funds were doing find when in fact the hedge funds, known as the "high grade" fund and the "enhanced fund" were losing a lot of money.

Of course, the Citigroup hedge fund collapse is still fresh in many investors' minds. The company offered investors a settlement of between 45 percent and 54 percent of their investments, little comfort to investors who expected their entire investment plus seven percent as a return. Investors are angry that they were told the investment was safe when in fact it was invested in mortgage-backed securities.

By the end, when Citigroup admitted the hedge funds were not likely to recoup their losses, the hedge funds were frozen so that investors could not sell their funds. They were left with the choice of accepting Citigroup's settlement offer or filing lawsuits.

Many people have lost money because hedge fund managers and other financial advisors lied about the stability of the funds. They are now investigating and filing lawsuits against the unscrupulous managers.

If you lost money in a hedge fund because you were misled by a hedge fund manager or other financial advisor, you may be eligible to join a lawsuit. Contact a lawyer to discuss your options.