Falcone Charged with $113.2 Million Rip-Off, Schemes New IPO

Yesterday, three weeks after the Securities and Exchange Commission filed fraud charges against New York-based hedge fund adviser Philip A. Falcone, it was reported he is about to launch a new IPO for investors. In fact, he is going to trade assets owned by his indicted hedge-fund to get control of a publicly-traded company and use that as his newest launching pad for murky deals. Example:

The announced company intends to buy “an MGM-branded hotel and casino development in Vietnam and a minority interest in an iron ore producer working in Brazil.” Sound tempting?

Philip A. Falcone and his advisory firm, Harbinger Capital Partners, were charged with misappropriation of client assets, market manipulation, and betraying clients. The SEC alleges Falcone fraudulently obtained $113.2 million of fund assets which he used to pay his own taxes and to conduct an illegal “short squeeze” to manipulate bond prices. He also secretly favored certain customers at the expense of others.

“Today’s charges read like the final exam in a graduate school course in how to operate a hedge fund unlawfully,” said Robert Khuzami, director of the SEC’s Division of Enforcement. “Clients and market participants alike were victimized.” The fund had been closed for redemptions at the time Falcone is said to have helped himself to the money, so that those who actually invested their own money were not permitted to withdraw.

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