Hedge Fund Fraud

Hedge funds are private investment partnerships consisting of investments in a large number of securities, which contrary to the title, may prove to be risky, profit driven investment vehicles.  One large distinguishing factor of hedge funds from other investment methods is the fact that these funds are not regulated by the SEC in the same manner as mutual funds or others, and in reality, are afforded great leeway in their financial practices.

How it Works

 Given the lack federal oversight and sometimes ahead of market expectations returns, more and more individuals have turned to hedge funds as part of their portfolio.  However, this arrangement leads investors susceptible to hedge funds fraud in a number of manners. Just because individual hedge funds do not have to register with the SEC or offer regulated reporting, does not mean that the entity can ignore other fiduciary duty and fraud laws.  Some of the most common claims filed against hedge funds include misrepresentation of past investment records, amount of leverage, risks accepts, and the individual fund manager’s professional experience and education.  Virtually all of these duties were violated in the notable case involving the Bayou hedge fund collapse and fraud.  One of the latest aspects of hedge funds fraud includes the implementation of a ponzi scheme, such as that seen in the Madoff case. 

Rules and Regulations

The SEC handles complaints from investors regarding hedge fund fraud and other illegal activity regarding these entities, however, having a securities fraud attorney represent and prepare your claims is essential.  As seen in some previous cases of major hedge fund fraud, claims against a given hedge fund were being made by investors to the SEC sometimes years before any legal action was taken, which was usually too late to prevent catastrophic investor losses. 

Legal Help

If you feel you have experienced financial losses due to hedge fund fraud, you have a number of legal rights.  Consult with a securities fraud lawyer today to determine the extent and strategy of recouping your losses through litigation.