Hedge Fund Fraud Strikes New JerseyJersey City, NJ is now famous, or rather should that be infamous. In addition to servin...
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Hedge fund operational_due_diligence_corgentum_blog_osiris

  1. 1. Hedge Fund Fraud Strikes New JerseyJersey City, NJ is now famous, or rather should that be infamous. In addition to serving as thelocation of Corgentums headquarters Jersey City is now also in the news for being the former homeOsiris Partners, a hedge fund firm accused of fraud.It was reported today that New Jersey state officials have sued Osiris over charges that it defraudedinvestors and sold approximately $12 million worth of unregistered securities. The scheme allegedlydefrauded over 75 investors from 2009 to 2011. Investors seemed to have poured money into thefirms flagship Osiris Fund, when it produced returns of over 273% in 2009.Earlier this year in January it was reported that the Osiris partner Peter Zuck had fled with investorsmoney. Additionally, reports also indicated that the firms former CEO Michael Spak was the one whofirst report Mr. Zuck to the FBI.Similar to many other hedge funds frauds such as Bayou, the Osiris Fund, did not preclude investorsfrom subscribing with a minimum of $1 million or more. Instead, the firm took a more retailmarketing approach with minimum investment of only $150,000. In an interview withFINalternatives in January 2010 Mr. Spak said, “When we decided to go against the grain of thehedge fund industry and create a fund for all, not just the millionaire and billionaire clients, I knew inmy head and my heart it was the right business model.”Interestingly, it was also reported that a background check on Mr. Zuck revealed that beginning in1995 he spent over a year in a New Jersey prison after being found guilty of "misconduct bya corporate official." The current legal proceeding outline that Mr. Zuck was a three-time convictedcriminal. Another huge red flag.“We allege these defendants enriched themselves by pocketing at least $4 million of investors’ hard-earned money from the fund while they concealed substantial losses,” Attorney General Jeff Chiesasaid in a statement.“This case clearly illustrates why we urge consumers to perform their due diligence before investingtheir money,” said Eric Kanefsky, acting director of the state Division of Consumer Affairs.The potential for hedge fund fraud is everywhere and investors need to perform initial and ongoingoperational due diligence to ensure that they are not involved in similar alleged fraudulent schemes.Originally posted on the Corgentum Consulting blog at www.Corgentum.com/blogFor More Jason Scharfman, Managing PartnerInformation info@corgentum.com Corgentum.com | Blog | Twitter Feed Tel. 201-360-2430© 2012 Corgentum Consulting, LLC