The SEC settled enforcement action against a Chicago-based hedge fund, its investment adviser, its founder and CEO, and two employees for their roles in an illegal late trading scheme.
The SEC charged Ritchie Multi-Strategy Global Trading Ltd., a hedge fund, and its Chicago-based adviser, Ritchie Capital Management LLC, as well as Ritchie Capital's founder and CEO A.R. Thane Ritchie and employees Warren DeMaio and Michael Mauriello. They will pay a combined total of approximately $40 million to settle the SEC's charges. These payments will be distributed to the affected mutual funds.
Ritchie Capital allegedly concealed its late trading by receiving pre-4 p.m. time-stamps on its order tickets. Specifically, the SEC found that from January 2001 through September 2003, Ritchie Capital engaged in an illegal late trading scheme. Ritchie Capital placed thousands of late trades in mutual fund shares and used post-4 p.m. ET news and market information to make its mutual fund trading decisions while receiving the same day's net asset value for the mutual funds traded. Thane Ritchie approved the use of late trading by Ritchie Capital's mutual fund group and oversaw its performance. DeMaio supervised mutual fund trading at Ritchie Capital and was involved in the development of the late trading strategy. Mauriello was responsible for placing mutual fund late trades with brokers on behalf of Ritchie Capital. Ritchie Capital's post-4 p.m. trading resulted in a profit of approximately $30 million to the Ritchie Multi-Strategy fund.
Please click http://www.sec.gov/litigation/admin/2008/33-8890.pdf for a copy of the administrative order.