| NEW YORK, June 23
NEW YORK, June 23 A former London-based
portfolio manager was sentenced to four years in prison on
Monday for inflating his hedge fund's assets by manipulating the
value of Nigerian debt.
Michael Balboa, a former portfolio manager at Millennium
Global Investments Ltd, was also ordered by U.S. District Judge
Paul Crotty in New York to forfeit $2.2 million prosecutors say
he earned in the scheme and pay $390 million in restitution over
A jury in December found Balboa, 45, guilty of securities
fraud, wire fraud, investment adviser fraud and two counts of
conspiracy, after an earlier trial ended in a
Due to the losses involved, Crotty said advisory federal
sentencing guidelines called for a life term. The judge said the
guidelines "vastly overstates the seriousness of the offense."
Joseph Tacopina, Balboa's lawyer, said prosecutors had said
as part of a proposed plea deal his client did not accept they
would recommend a sentence of five years in prison. Tacopina
said Balboa would appeal.
"He personally didn't cause an investor to lose one dollar,"
Tacopina said in court.
The case centered on Millennium Global Emerging Credit
Fund, which invested in emerging markets corporate and sovereign
debt. The fund once reported $844 million in assets, according
to the U.S. Securities and Exchange Commission.
Prosecutors said Balboa, who ran the emerging credit fund
from December 2006 to October 2008, inflated the value of
illiquid warrants tied to Nigerian debt, in an effort to
increase the apparent performance of the fund and boost his
As part of the scheme, which began in January 2008, Balboa
instructed two co-conspirators to provide inflated values for
the warrants to an independent valuation agent used by
Millennium, prosecutors said.
While the warrants in 2008 traded for no higher than $239,
Balboa instructed his co-conspirators to give the agent values
of $525 to $3,500, prosecutors said.
The inflated valuations resulted in the emerging credit
fund's own value to be overstated by about $80 million as of
August 2008, prosecutors said.
Balboa that year earned $8.14 million, $2.2 million derived
directly from the scheme, the government said in a court filing
The emerging credit fund shut down in October 2008. Charges
by the U.S. Justice Department and SEC were announced in 2011.
The case is U.S. v. Balboa, U.S. District Court, Southern
District of New York, No. 12-cr-00196.
(Reporting by Nate Raymond in New York; Editing by Cynthia