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Saturday, October 19, 2019

Alleged Hedge Fund Scammer Caught


Date: Friday, January 9, 2009
Author: HFN Daily Report

In case you thought Bernard Madoff was the only news involving scams and hedge funds, there are reports that Alexander Trabulse was taken into custody on Monday by federal officials in San Francisco for allegedly running a scam hedge fund and defrauding investors out of millions of dollars. He was arrested on mail fraud charges by prosecutors for sending false statements to investors.

The government has been on Trabulse for the last few years in its attempt to bring the alleged scam artist to justice. According to an SEC statement and complaint, Trabulse used investor money to pay for a lavish lifestyle.

"Trabulse also treated fund assets as if they were his own, using the fund as a slush fund for himself and his family," claimed a September 2007 SEC complaint.

The government alleges that Trabulse used the money to pay for a variety of expenses, including shopping for his now ex-wife and to buy properties in California, France and Panama. The SEC also claimed that he used the money to pay for cars, a home theater system and gave one relative, reportedly his daughter, free reign to use the fund's bank accounts for personal use.

While he was spending investor money on these kinds of items, he is alleged to have lied to investors in earnings statements saying the fund and limited partners' investments were worth more than they really were. For example, the SEC alleges that on Dec. 31, 2006 Trabulse said the fund was worth more than $45 million, but in reality it was worth less than $10 million. The SEC also claimed that from 1998 until 2006 Trabulse said the fund had gains of $30 million even though profits were really less than $10 million.

According to the SEC, Trabulse founded Fahey Fund in 1997 and raised about $10 million from approximately 100 investors. He told investors the fund invested in stocks, derivatives and foreign currencies. He lured investors into the fund touting his supposed returns, which the SEC claims were false.

Trabulse was arrested at the San Francisco International Airport earlier this week after arriving on a flight from France, where he is reported to have spent nearly half of his time in the last three years. According to a spokeswoman from the U.S. District Court in San Francisco, Trabulse is currently out on bond, but he is due back in court at the end of the week for a detention hearing. That is when he will learn if he is to be detained by the court.