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Portus Co-Founders Charged by Regulators Over Fund's Collapse

Date: Tuesday, April 25, 2006
Author: Bloomberg.com

Portus Alternative Asset Management Inc. co-founders Boaz Manor and Michael Mendelson were accused by Canadian regulators of lying to investors as the hedge fund collapsed last year.

The Ontario Securities Commission charged both men on April 20 with failing to act in good faith with clients. Mendelson also was charged with unregistered trading and issuing securities without filing a prospectus.

The charges were the first for Mendelson, whose lawyer Joyce Harris said in November that he was close to settling the good-faith claim with the OSC. Manor was charged in October with misleading OSC staff and unregistered trading. Portus, founded in 2002, attracted about C$800 million ($707 million) from around 26,000 investors before it went under.

Mendelson and Manor face maximum penalties of C$5 million and five years in jail. A court hearing hasn't been scheduled, said Eric Pelletier, an OSC spokesman. He declined to comment on the settlement talks with Mendelson.

Harris didn't immediately respond to a request for comment.

Manor left for Israel before the OSC seized Portus's assets in March 2005. KPMG LLP, the fund's trustee, is trying to find as much as $18 million that was missing from the accounts, including $8.8 million of diamonds Manor arranged to buy last year in Hong Kong.

The case is Ontario Securities Commission v. Portus Alternative Asset Management, 05-CL-5792, Ontario Superior Court (Toronto).