Corporate & Securities Law

The SEC announced fraud charges and an asset freeze against a Highland Park, IL-based hedge fund manager and his firm for facilitating a multi-billion dollar Ponzi scheme operated by Minnesota businessman Thomas Petters.  The SEC's complaint, filed in U.S. District Court for the District of Minnesota, alleges that Gregory Bell and Lancelot Management LLC invested more than $2 billion in hedge funds assets with Petters and pocketed millions of dollars in fraudulent fees at the expense of investors in the funds.  The SEC's complaint also charges Petters with fraud for perpetrating the massive Ponzi scheme through the sale of notes related to consumer electronics.  When Petters's scheme began to unravel, Bell participated in a series of sham transactions to conceal that Petters owed more than $130 million in investor payments on the notes.

According to the SEC's complaint, Petters carried out his Ponzi scheme from as early as 1995 through September 2008, promising investors that proceeds from the notes they were sold would be used to finance the purchase of vast amounts of consumer electronics by vendors who then re-sold the merchandise to "Big Box" retailers including such well-known chains as Wal-Mart and Costco. Instead, the "purchase order inventory financing" business was a complete sham, and the vendors secretly returned most investor money back to Petters, who diverted billions of dollars for his own purposes. 

SNSFE continues to investigate Petters as well as the role of feeders such as Lancelot Management.  Those with information should feel free to contact attorneys at SNSFE.

Source:  SEC Press Release 2009-156