Hed

1. Hedge Fund Fraud Strikes New Jersey
Jersey City, NJ is now famous, or rather should that be infamous. In addition to serving as the
location of Corgentum's headquarters Jersey City is now also in the news for being the former home
Osiris Partners, a hedge fund firm accused of fraud.
It was reported today that New Jersey state officials have sued Osiris over charges that it defrauded
investors and sold approximately $12 million worth of unregistered securities. The scheme allegedly
defrauded over 75 investors from 2009 to 2011. Investors seemed to have poured money into the
firm's 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 investors
money. Additionally, reports also indicated that the firm's former CEO Michael Spak was the one who
first report Mr. Zuck to the FBI.
Similar to many other hedge funds frauds such as Bayou, the Osiris Fund, did not preclude investors
from subscribing with a minimum of $1 million or more. Instead, the firm took a more retail
marketing approach with minimum investment of only $150,000. In an interview with
FINalternatives in January 2010 Mr. Spak said, “When we decided to go against the grain of the
hedge fund industry and create a fund for all, not just the millionaire and billionaire clients, I knew in
my 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 in
1995 he spent over a year in a New Jersey prison after being found guilty of "misconduct by
a corporate official." The current legal proceeding outline that Mr. Zuck was a three-time convicted
criminal. 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 Chiesa
said in a statement.
“This case clearly illustrates why we urge consumers to perform their due diligence before investing
their 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 ongoing
operational 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/blog
For More Jason Scharfman, Managing Partner
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