Bernie Madoff, courtesy of ABC News via YouTubeFather and son hedge fund managers who invested some of their clients’ money with jailed swindlers Bernie Madoff and Tom Petters, agreed to plead guilty Tuesday to criminal charges that they lied about their investment record, the U.S. Attorney’s Office in Boston said.
Gabriel Bitran, a former professor at the Massachusetts Institute of Technology and associate dean at its business school, and his son Marco, will be sentenced to serve at least two years but no more than five years in prison if the court accepts the pleas, the DOJ said.
Father and son claimed their hedge fund used a “complex mathematical trading model” developed by the elder Bitran in his MIT research on optimal pricing theory. In fact, the money was invested in “funds of funds” that relied on other hedge funds to invest, prosecutors said.
The other hedge funds included those run by the now-jailed Petters and Madoff.
The Bitrans founded GMB Capital Management in 2005 and raised more than $500 million from wealthy investors who believed their claims about the professor’s computer models, which the pair falsely said delivered investment returns of between 16 percent and 23 percent.
At the height of the financial crisis in fall of 2008, when several of the Bitrans’ funds plunged in value, the pair pulled roughly $12 million of their own money out, but they left their investors stuck in tumbling investments, U.S. attorney Carmen Ortiz said.
The men lost more than $140 million of GMB investors’ principal.
In 2009, the scam was exposed when authorities investigating the Madoff Ponzi scheme asked the Bitrans for supporting documents for the fund’s performance claims. The Bitrans made false statements to examiners at the Securities and Exchange Commission and handed over fabricated records to try to support their claims of superior trading performance.
Father and son have been accused of conspiracy to commit securities fraud, wire fraud and obstruction of justice in connection with their hedge fund businesses, GMB Capital Management and GMB Capital Partners.
Two years ago, the men settled civil charges with the SEC when they neither admitted nor denied the SEC’s findings and agreed to disgorge $4.3 million, pay a $250,000 fine each and be barred from the securities industry, the SEC said.
Madoff is serving 150 years in prison for turning his wealth management business into a giant Ponzi scheme. Petters was sentenced to 50 years in prison on similar charges.
_______
Julie DiMauro is the executive editor of FCPA Blog and can be reached here.
Comments are closed for this article!