SEC Links Hedge Fund to Ponzi Scam

     (CN) – An Illinois-based hedge fund manager pocketed millions of dollars in Thomas Petters’ multibillion-dollar Ponzi scheme, the SEC says. Gregory Bell, of Highland Park, and his Lancelot Management hedge fund placed more than $2 billion with Petters and collected millions in fraudulent fees at investors’ expense, the SEC claims in Federal Court.

     The complaint in Minneapolis Federal Court also accuses Petters of fraud in the scheme involving phantom consumer electronics that Petters claimed he bought for resale to major retailers.
     When the scheme began unraveling, Bell helped conceal Petters’ debts of more than $130 million to investors the SEC says.
     Petters’ scam began in 1995 and continued through September 2008, according to the complaint. The SEC claims the “purchase order inventory financing” business was a complete sham, and vendors secretly returned most investor money to Petters, who diverted billions of it for his own purposes.
     The investors were individuals, retirement plans, individual retirement accounts, trusts, corporations, partnerships, and other hedge funds. Bell and Lancelot Investment used almost all of the fund assets to buy notes from Petters and his companies, the SEC says.
     U.S. District Judge Ann D. Montgomery in Minneapolis issued an order freezing Bell’s assets, and those of his wife, Inna Goldman.
     Petters was charged in October 2008, and is in custody awaiting federal trial.
     The SEC says Bell, Lancelot Management, and the hedge funds they manage have never been registered with the SEC or any other regulatory agency.

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