UPDATE 2-'Fund boss' was really a driver-US court papers

(Adds prosecutor's statement, details on defendants)

By Grant McCool

NEW YORK May 1 (Reuters) - A New York man who told investors he was president of a hedge fund called AR Capital Group Inc (ARC) was really a hired driver, according to court documents on Friday in which he and two others were charged with fraud.

The self-described president of ARC, Alan Fishman, 49, and Daniel Ledven, 37, a purported manager at the fund from 2002 until it closed in February 2006, were arrested on Thursday night. The third accused, Fishman's nephew Gary Gelman, 39, is at large.

All three were charged with securities and wire fraud, according to criminal complaints filed in Manhattan federal court. If convicted, they face up to 20 years in prison.

"The primary occupation of the president of ARC, was as a livery driver, and the president had very little investment experience prior to starting ARC," according to one document citing Ledven's testimony to the U.S. Securities and Exchange Commission in November 2006.

The office of the U.S. Attorney for Manhattan said in a statement that when the SEC told ARC in 2006 it was investigating "A.R. Capital and the fund then ceased operations abruptly. The investors lost their investments" of about $20 million.

Fishman's lawyer Arthur Gershfeld declined comment after his client was released on $700,000 bond. The judge ordered Ledven to be released on $500,000 bond.

Fishman, who told investigators he once ran a successful transportation business, testified to the SEC in October 2006 that the fund never focused on real estate or leveraged trading as had been spelled out in a publicity brochure.

A special agent of the FBI said in the complaint that ARC, which allegedly sent out phony statements, actually raised $14.9 million from individual investors in the fund. About $12 million was wired to various bank accounts in Ukraine, the complaint said.

It said that when the fund was purportedly sold to a new owner in February 2006, the sale price was given as only $150,000. Fishman, Gelman and Ledven each received $40,000, the court papers said.

They said the fund solicited $5 million more after the firm's closing and bank records showed $6 million was wired to bank accounts in Lithuania, including one held by a company in St Kitts and Nevis in the Caribbean. The fund's bank account in New York had less than $700,000 when it closed.

The cases are USA v Alan Fishman and Gary Gelman 09-mag-1089 and USA v Daniel Ledven 09-mag-1088 in U.S. District Court for the Southern District of New York (Manhattan) (Reporting by Grant McCool; Editing by Steve Orlofsky, Bernard Orr)