4.26.2009 The SEC has charged a Connecticut-based hedge fund with fraud. According to the SEC, Francesco Rusciano solicited investments for two hedge funds he controls — Ponta Negra Fund I, LLC and Ponta Negra Offshore Fund I, LTD — and also is the principal of Ponta Negra Group, LLC, which is located at his residence in Stamford, Conn. Specifically, the SEC alleges that on at least two occasions, Rusciano forged brokerage account statements to make it appear that a hedge fund account had millions of dollars more in assets than it actually had.
The SEC stated that Rusciano provided a selling agent with a January 11, 2008, brokerage statement reflecting an account balance of more than $43 million for Ponta Negra Fund I. The SEC alleges that the correct balance for that account on that date was less than $3 million. Similarly, the SEC' stated that on Aug. 5, 2008, Rusciano produced to another selling agent a brokerage account statement reflecting an "equity" balance for Ponta Negra Fund LLC of more than $64 million. The SEC alleges that Rusciano altered the account statement by "whiting out" the word "excess" in the "excess equity" field on the account statement to make it appear as though the hedge fund's account had approximately $64 million, when in fact the account had less than $7 million.
In addition to forging brokerage account statements, the SEC alleges that Rusciano misrepresented the hedge fund's monthly and yearly performance results. Rusciano falsely represented that the funds had consistently achieved positive results for every month throughout 2007 and 2008 when, in fact, the hedge funds lost money in 10 of the 24 months from March 2007 through March 2009 in the account that held most of the hedge fund's assets. The SEC also alleges that Rusciano misrepresented that the Ponta Negra hedge funds earned total annual returns of 42.99% for 2007, 24.85% for 2008, and 6.14% for the first two months of 2009. The account that held most of the Ponta Negra hedge funds' assets actually suffered substantial trading losses in 2007, had modest profits in 2008, and again sustained losses in 2009.
The SEC further alleges that on April 21, 2009, Rusciano sent an e-mail to a selling agent detailing the hedge fund's assets under management. According to the e-mail, the Ponta Negra hedge funds had $59 million in assets under management as of February 2009. According to the SEC', the hedge funds had less than $10 million.
Click http://www.sec.gov/litigation/litreleases/2009/lr21012.htm to access information about the administrative action.