New York (HedgeCo.Net) – Robert Buckhannon and Terry Rawstern have been arrested by the FBI for attempting to steal from the 2 Florida hedge funds they ran, NBC reports. They could each spend up to 30 years in jail if convicted.
Back in 2010 they were two of four managing members of the now-defunct hedge funds, Arcanum Equity Fund, LLC and Vestium Equity Fund, LLC, through which they conducted an offering that raised $34 million from 101 investors throughout the U.S. and Canada.
The Department of Justice said the defendants then looted and bankrupted the hedge funds by taking payments on false and fictitious profits, while taking improper and undisclosed loans. The indictment states that as a result of the defendants’ conduct, investors lost approximately $13.1 million.
“Often these cases take considerable time and resources to investigate and litigate, but the American people deserve to know that we are working diligently to catch the perpetrators,” Nevada U.S. Attorney Daniel Bogden said in a statement after the indictment was unsealed.
The team collectively misappropriated at least $734,000 of investor funds to themselves and others.
The SEC’s complaint, alleges that the Managing Members raised funds promising investors that they would generate substantial returns through conservative investments in high-grade debt instruments. However the team used the investor funds for illiquid private investments and loans to affiliate entities.
Additionally, although the Funds incurred investment losses of at least $8.1 million, the Managing Members disseminated monthly statements falsely depicting consistent profits and paid at least $6 million to investors in alleged profits. The Managing members further paid themselves over $1.3 million in compensation that was improperly based on inflated asset values and fictitious profits.
Alex Akesson
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