WEST PALM BEACH, Fla. (CN) – Michael Lauer of Greenwich, Conn., defrauded his hedge fund clients of $500 million through “egregious, pervasive, premeditated” fraud, a federal judge ruled.
U.S. District Judge Kenneth Marra granted the Securities and Exchange Commission’s motion for summary judgment against Lauer and his companies, Lancer Management Group and Lancer Management Group II. Lauer collected more than $1.1 billion from clients and lost half a billion of it, Marra ruled.
The judge found that Lauer had overstated the value of the hedge funds, manipulated the prices of seven securities that were central to the funds’ portfolios, failed to explain the exorbitant valuations of the shell corporations saturating the portfolios, gave investors fake portfolio statements and misrepresented the funds’ holdings in newsletters.
The SEC previously won a motion to freeze the assets of Lauer and his companies, preventing them from diverting or hiding millions of dollars of assets from the court’s asset freeze.
Marra permanently enjoined Lauer and his companies from future securities violations. However, the court withheld judgment on the SEC’s demand that Lauer pay a penalty and disgorge more than $50 million in ill-gotten gains until an evidentiary hearing could be held.