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Hedge Fund Manager Arrested in Italy

LOS ANGELES (CN) - After five years on the lam, a German hedge fund manager accused of defrauding people of $200 million has been arrested in Italy, U.S. prosecutors said.

Florian Wilhelm Jurgen Homm, 53, was arrested Friday afternoon at the Uffizi Gallery in Florence, the U.S. Attorney's Office said in a statement.

The U.S. Attorney's Office filed a four-count criminal complaint accusing him of conspiring to commit wire fraud and securities fraud, and wire fraud and securities fraud.

Homm is accused of manipulating the prices of thinly traded penny stocks. He was founder and chief investment officer of Absolute Capital Management Holdings, a Cayman Islands-based investment adviser that managed nine hedge funds from 2004 until September 2007, prosecutors said.

"After the hedge funds invested hundreds of millions of dollars in the illiquid penny stocks, Homm caused the hedge funds to trade the stocks among themselves in 'cross-trades' made through the Los Angeles-based broker dealer," the U.S. Attorney's Office said. "As part of the stock manipulation scheme, Homm and others allegedly sold their own shares of the penny stocks to the hedge funds managed by Homm. The cross-trades served to increase the trading prices of the previously illiquid stocks and, in turn, to boost the net asset values and apparent performance of the hedge funds. This apparent performance improvement at the hedge funds generated additional fees for Homm and Absolute Capital, as well as boosting Absolute Capital's stock price on the London Stock Exchange, Alternative Investment Market."

Homm was a co-owner of the Los Angeles-based broker-dealer, Hunter World Markets, the U.S. attorney said.

"Following allegations made by a whistleblower in 2006, Homm also dumped tens of millions of dollars worth of his own shares in Absolute Capital prior to resigning from the firm in the middle of the night on Sept. 18, 2007," prosecutors said in the statement. "The allegedly fraudulent conduct caused at least $200 million in losses to investors in the hedge funds. The scheme allegedly netted Homm and his co-schemers more than $53 million via trades made through Hunter World Markets alone."

Homm recently published a book that was translated into English under the title,

"Rogue Financier: The Adventures of an Estranged Capitalist," prosecutors said.

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