Another Hedge Fund Fraud

["ÁÎ×Ó¹â HenryC.K.Liu ¹ù¤l¥ú" <hliu@xxxxxxxxxxxxxx>]

$40 million, here, $40 million there, pretty soon it adds up to real
money.
And Greenspan says there is no need for regulations

Henry C.K. Liu


Friday March 3 7:15 PM ET

 Broker Admits Cheating Investors

 By JEFFREY GOLD Associated Press Writer

 NEWARK, N.J. (AP) - A stockbroker admitted Friday that he cheated 180
investors from around the world of $40 million that they invested with
his hedge funds over the past eight years.

 Amid the longest-running bull market in history, John C. Natale used
the money to place high-stakes bets that there would be a downturn,
notably in technology stocks and their indexes.

 The downturn never happened. To hide the mounting losses in his funds,
Natale created false audits, tax documents and monthly statements to his
investors showing strong returns, he admitted in Superior Court Friday.
 Natale, 44, pleaded guilty to three felony charges: securities fraud,
theft, and misappropriation of property.

 Natale had claimed that the funds,Cambridge Partners and Cambridge
Partners II, were worth $50 million. In reality, only $3 million
remains, Natale said.

 Authorities first learned of the fraud when Natale contacted the state
 attorney general's office two weeks ago. A plea bargain was swiftly
reached:  Natale provided all his records, pledged to cooperate, and
agreed to repay  the investors as much as he could with the remaining
money and his  personal assets.

 A court-appointed receiver has taken control of the funds, state
Assistant  Attorney General Kimberly McFadden Guadagno said. The
receiver, James R. Zazzali, is to determine how much each investor lost
or gained, and whether those who made money might be required to return
a portion.

 Zazzali is to return to investors whatever money the state can recover
from Natale and the funds.

 Natale remains free on $500,000 bail pending sentencing, set for May
19. Prosecutors are expected to recommend he be sentenced to no more
than 10 years in prison.

 Natale was not available for comment after entering the plea. His
lawyer, Edward J. Plaza, declined to elaborate on why Natale turned
himself in.

 Hedge funds are typically high-risk investment funds for wealthy
individuals and institutional investors who speculate on movements in
the financial markets.

 Many, like those managed and controlled by Natale, do not register with
stock regulators, which is permitted as long as they do not advertise,
state Deputy Attorney General Andrew L. Rossner said.