May 3, 2018 / 7:56 PM / 6 months ago

Massachusetts hedge fund manager gets six years in prison for fraud

BOSTON (Reuters) - A Massachusetts hedge fund manager was sentenced on Thursday to six years in prison for defrauding investors in a scheme that prosecutors said cost his clients over $10.5 million and allowed him to fund a lavish lifestyle.

Yasuna Murakami, who managed MC2 Capital Management LLC and another investment advisory firm, wiped away tears before being sentenced by U.S. District Judge Douglas Woodlock in Boston as he apologized for the harm he caused his victims.

“I’m deeply ashamed of my crime,” Murakami said in court.

According to securities regulators, from 2007 to 2016, Murakami and a business partner operated three hedge funds through two Cambridge, Massachusetts-based investment advisory businesses, MC2 Capital and MC2 Canada Capital Management LLC.

Prosecutors said that Murakami, 45, schemed to defraud investors in a hedge fund he set up in 2011 that was managed by MC2 Canada and that allowed U.S. investors to gain exposure to a fund overseen by Toronto-based Donville Kent Asset Management.

After soliciting money from investors for MC2 Capital Canadian Opportunities Fund, Murakami misused investments for personal expenses like international travel and high-end department stores, according to a criminal complaint.

He also used investor funds to make personal investments in the MC2 Canadian fund; to pay for a black Nissan GT-R sports car; cover the costs of international travel; and to make Ponzi-like payments to earlier investors, prosecutors said.

“He went to great lengths to con new and existing investors out of their retirement savings, out of their 401(K)s and IRAs, knowing full well he was never going to be able to pay that money back,” Assistant U.S. Attorney Jordi de Llano said in court.

Prosecutors said the multi-year scheme resulted in more than $10.5 million in losses, an amount equal to what Woodlock on Thursday ordered Murakami to pay in restitution to his victims.

Murakami’s arrest in May 2017 came after Massachusetts state securities regulators earlier that year accused him of operating a Ponzi scheme. He pleaded guilty in January to one count of wire fraud.

The U.S. Securities and Exchange Commission also filed a related lawsuit accusing Murakami and his partner, Avi Chiat, of defrauding more than 50 investors in their three funds after raising more than $15 million.

The SEC’s case against Chiat is pending. His lawyer did not respond to a request for comment.

The case is U.S. v. Murakami, U.S. District Court, District of Massachusetts, No. 17-cr-10346.

Reporting by Nate Raymond in Boston; Editing by Dan Grebler

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