New York fund manager to serve nearly four years in prison for Ponzi scheme

NEW YORK Wed May 7, 2014 5:47pm EDT

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NEW YORK (Reuters) - A former New York fund manager was sentenced Wednesday to nearly four years in prison after admitting to running a Ponzi scheme in which he stole $2.9 million from hedge fund investors.

U.S. prosecutors had sought up to 4 -3/4 years in prison for Jason Konior, who pleaded guilty in July to a count of wire fraud for the scheme he operated from 2011 to 2012.

U.S. District Judge Alvin Hellerstein of Manhattan federal court sentenced Konior to three years, 10 months in prison followed by three years of supervised release. The judge also ordered Konior to forfeit $2.9 million.

Douglas Jensen, Konior's lawyer, declined comment.

Konior founded Absolute Fund LP in 2006, offering hedge funds and other investors the ability to trade securities with leverage greater than they would be able to receive on their own.

At his plea hearing last year, Konior said that in the fall of 2011, Absolute suffered a loss of $2.7 million that prevented the fund from continuing to provide the same enhanced leverage to investors.

Despite that, Konior admitted that in soliciting new investments from hedge funds he failed to disclose the loss and used part of their capital contributions to pay old investors who were demanding redemptions. A Ponzi scheme is one in which the operator pays returns from capital paid by new investors instead of from profits.

Prosecutors said Konior used some of the $2.9 million he stole to pay himself and cover business expenses.

The U.S. Securities and Exchange Commission subsequently filed a lawsuit in May 2012, obtaining an asset freeze against Konior and his companies. Prosecutors announced criminal charges in February.

The case is U.S. v. Konior, U.S. District Court, Southern District of New York, No. 13-275.

(Reporting by Nate Raymond in New York; Editing by Grant McCool)

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