August 11, 2016 / 11:31 PM / 3 years ago

U.S. charges San Francisco hedge fund manager with fraud

NEW YORK (Reuters) - Federal prosecutors on Thursday announced criminal fraud charges against a San Francisco hedge fund manager who allegedly schemed to raise money by falsely boasting of his formidable performance record and overstating the amount of assets he managed.

U.S. Attorney Preet Bharara in Manhattan said Nicholas Mitsakos enticed investors by telling them he oversaw more than $60 million of assets and posted annual returns of 20.9 percent to 66.3 percent between 2012 and 2015 at his firm, Matrix Capital Markets LLC.

But, according to Bharara, the returns were based on a hypothetical portfolio rather than actual investments, and Mitsakos invested no customer assets before receiving a $1.99 million investment from a Cayman Islands fund in September 2015.

Rather than invest that money, however, Mitsakos diverted $800,000 to cover personal expenses, including Mercedes car payments, credit cards, rent and legal bills, and lost more than two-thirds of the money he did invest, authorities said.

“Mitsakos and his firm tried to lure prospective investors with a mirage of assets under management and phony performance results, and when they finally won some actual business from a client, they proceeded to steal a large portion,” Andrew Calamari, director of the SEC’s New York regional office, said in a statement.

Mitsakos was criminally charged with securities fraud, wire fraud and conspiracy. The U.S. Securities and Exchange Commission filed related civil charges against him and Matrix. Mitsakos is 56, the SEC said.

Bharara said Mitsakos surrendered to law enforcement on Thursday in Los Angeles.

It was unclear whether Mitsakos had hired a lawyer. Matrix could not immediately be reached for comment. A message left at a San Francisco phone number listed for Mitsakos was not immediately returned.

The cases are U.S. v Mitsakos, U.S. District Court, Southern District of New York, No. 16-mag-04997; and SEC v. Matrix Capital Markets LLC et al in the same court, No. 16-06395.

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