MANHATTAN (CN) – Former stockbroker Kosta Kovachev was arrested Tuesday on charges that he helped Marc Dreier, the jailed attorney, defraud hedge funds of more than $100 million. Federal prosecutors say Kovachev pretended to represent a development company in meetings that Dreier held with hedge funds he victimized.
Dreier, founder of the 250-attorney New York law office Dreier LLP, was arrested in Canada on Dec. 7 on charges that he bilked hedge funds of more than $100 million by falsely claiming to be selling discount notes issued by New York developer Sheldon Solow. Dreier LLP filed for bankruptcy on Dec. 16.
The federal indictment issued Tuesday alleges that Kovachev portrayed himself as the controller of a development company in a meeting Dreier held with hedge fund managers who were worried about the $115 million they already had paid Dreier for promissory notes.
It also accuses Kovachev of acting as a go-between for Dreier and a hedge fund that the now-jailed lawyer bilked for $25 million. In that instance, Kovachev is accused of pushing “fictitious promissory notes that Dreier wanted to sell” to a hedge fund in October.
Kovachev is charged with conspiracy to commit wire fraud.
According to Bloomberg News Service, in 2006 the SEC ordered Kovachev to pay $350,000 for allegedly bilking more than 600 investors of $28 million in a time-share Ponzi scheme.