The SEC has charged New York-based hedge fund advisor Philip A. Falcone with fraud, along with his firm Harbinger Capital Partners LLC.
The charges were for illicit conduct including misappropriation of clients’ assets, market manipulation, and betraying clients.
The former COO of Harbinger, Peter A. Jenson, was also charged with aiding and abetting.
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The charges by the SEC state that Falcone used fund assets to pay his own taxes, manipulated bond prices by conducting an illegal short squeeze, favoured particular customers at the expense of others, and through Harbinger, illegally bought equity securities in a public offering, after having sold short the same security during a restricted period.
“Today’s charges read like the final exam in a graduate school course in how to operate a hedge fund unlawfully,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.
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The SEC also made charges against Harbert Management Corporation, the affiliates of which were the controlling persons in the market manipulation scheme.
The SEC filed these actions in U.S. District Court for the Southern District of New York against Falcone, Jenson, and Harbinger.
A settlement was reached with Harbinger for its unlawful trading.