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SEC Sues Hedge Fund Firm International Management Associates

The Rocky Mountain News has more information on International Management Associates in its February 28, 2006 edition in a story entitled SEC sues hedge fund firm. The first portion of this news story reads:

The hedge fund firm that managed money for three former Denver Broncos players and wide receiver Rod Smith hid massive losses from clients in a fraudulent investment scheme, according to the Securities and Exchange Commission. Atlanta-based International Management Associates and Chief Executive Kirk Wright raised as much as $185 million from up to 500 investors, but almost all the money has disappeared, the SEC claimed in a lawsuit filed Monday.

In a letter sent to one investor, International Management said its Taurus Fund, one of several hedge funds it offered, had gained 20 percent in 2005, the SEC found. Unfortunately for the investors, Wright grossly inflated his returns and gave "blatantly false information" about the value of the assets in the hedge funds, the SEC said. There is now less than $500,000 in Ameritrade accounts, the lawsuit contends. And the SEC said some "critical" records could not be found at the International Management offices.

The Atlanta Constitution Journal also has information on the SEC’s entry into the International Management Associates fraud case in a story entitled SEC enters hedge fund case. This story details how five counts of fraud have been alleged against Kirk Wright and International Management Associates (“IMA”), how jurisdiction of the case has been transferred to federal courts from Georgia state courts and how some assets of the two other principals, Nelson Keith Bond and Fitz Harper, both local anesthesiologists, have been released from freeze. The two men contended they were victimized investors and volunteered to cooperate with investigators.

Given that International Management Associates supposedly registered with the SEC last month under the new hedge fund investment advisor rules and reported no problems, it is now highly likely that the public will shortly will be learning of more charges against Kirk Wright and his International Management Associates hedge fund firm. The really interesting question is what other people knew of this alleged fraud, when they knew of it and what, if anything, they did upon learning the news. Toomre Capital Markets LLC finds it hard to believe that a $185 million fraud against more than 500 investors could be perpetuated by just one person. And how the heck does one lose $185 million, even if one massively shorts the stock of Time Warner?

Toomre Capital Markets LLC has also posted on this fraud by Kirk Wright and International Management Associates in posts here, here and here. Thoughts and comments are welcome.