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Hedge fund fraudster to pay $2.78M

Date: Thursday, April 9, 2009
Author: Craig M. Douglas, Boston Business Journal

A Massachusetts federal court has ordered a British man to pay $2.78 million in restitution, interest and penalties for orchestrating a scheme to defraud more than 60 investors who invested in his phony hedge fund operation based in Boston.

The Securities and Exchange Commission said Wednesday that Glenn Manterfield, a principal at Lydia Capital LLC, was originally charged in April 2007 for allegedly defrauding clients who had invested $34 million in a Lydia Capital fund — the so-called Lydia Capital Alternative Investment Fund.

In reality, Manterfield, a U.K. citizen, and an affiliate, Evan K. Anderson, failed to invest in a portfolio of life insurance policies — as originally promised — and instead used the money for their own personal gain. The SEC also said the duo lied about Lydia’s investment returns, invented business partners, glossed over Manterfield’s “significant criminal history” and generally misstated the nature of the investment firm’s assets.

In regulatory filings with the SEC, Lydia Capital lists Manterfield as a “member” of the firm and Anderson as its chief compliance officer. The firm was headquartered at 28 State St. in Boston and had its books kept in Bermuda, according to the filings.

According to its most recent filings with the SEC, Lydia Capital had $49 million in assets under management.

In September, Anderson was ordered to pay $1.8 million in fines and penalties similar to those levied against Manterfield. Approximately $675,000 of that amount was to come in the former of Anderson's transfer of his Boston condominium at 43 Winter St. The condo was sold to a Zachary Sadek for $555,000 in January, according to court filings.

Management of Lydia Capital's Web site, www.lydiacapital.com, has been taken over by H. Thomas Moran II, a court-appointed receiver assigned to liquidate the condo, among other things.

A temporary restraining order to freeze the defendants’ assets was issued at the time of the original complaint filing. A similar freeze on roughly $1 million in Manterfield’s assets was already in place at the time in the United Kingdom.

The SEC said Manterfield is liable for $2.35 million in disgorgement of profits, $425,998 in prejudgement interest and $130,000 in civil penalties. The agency said its investigation was assisted by the U.K.’s Financial Services Authority and the Securities Division of the Massachusetts Secretary of State’s office, which also filed a suit against Manterfield and Lydia Capital in April 2007.