Regulators sue New York financier over an alleged Ponzi scheme
US hedge fund manager in $6m fraud claim
Regulators in the US have sued a New York hedge fund and its owner, Guy Albert de Chimay, claiming he operated a Ponzi scheme and diverted at least US$6 million (Dh22m) of investors' money to fund a lavish lifestyle and pay divorce lawyers. The US Securities and Exchange Commission (SEC), the country's financial regulator, filed the suit in a New York district court. Criminal charges have also been filed.
The SEC alleges Mr de Chimay raised millions of dollars from investors claiming to represent a wealthy Belgian royal family that dated back to the 14th century and purported to manage $200m on their behalf and for outside investors. Mr de Chimay, 47, was arrested on Friday in North Carolina and indicted on grand larceny and forgery charges, according to a Bloomberg report. A Ponzi scheme, named after the Italian swindler Charles Ponzi, is a fraudulent investment operation that pays returns to separate investors from their own money or money paid by subsequent investors, rather than from any actual profit earned.
The SEC's case against Mr de Chimay centres on a programme started in 2008 in which Chimay Capital offered investments in a "bridge loan facility". The company said investors would have their funds "pooled with Chimay family money to make lucrative short-term bridge loans to companies with ties to Chimay Capital", the SEC alleges. Annual returns of 12 per cent were guaranteed "regardless of the actual performance of the loans" it claims.
Mr de Chimay used the Chimay family name to entice investors, the SEC charges, but instead "simply stole" their money. The SEC claims more than $600,000 was spent on attorneys' fees for Mr de Chimay's divorce, along with large sums transferred to the owner's personal bank account to fund a lavish lifestyle, pay off credit card bills and take care of the company's rent and payroll expenses. The SEC also alleges Mr de Chimay "brazenly falsified" bank statements to convince both investors and banks from which he sought loans that he had many millions of dollars in an account in Bermuda.
"In reality," the SEC claims, "the account balance was zero." "At least $6m in investments solicited between October 2008 and September 2009 were misappropriated" by Mr de Chimay, the SEC alleges. He used some of the money to pay off investors in other of the company's funds and business ventures, it claims. The case is the latest of a number of alleged Ponzi schemes that have come to light during the global downturn. The US financier Bernie Madoffis serving a 150-year sentence for swindling some $50 billion.
Last week, a court granted a request to freeze the assets of Mr de Chimay and Chimay Capital. Mr de Chimay has no known lawyer, according to Bloomberg, and could not be reached for comment. firstname.lastname@example.org