A Case Study on Hedge Fund Fraud

Muhtaseb, Majed R.

doi:10.3905/jwm.2005.571011

Cited by 2 publications

(1 citation statement)

References 7 publications

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“…In addition, more and more private and public pension funds are increasing the percentage of their portfolio devoted to hedge fund investments. Muhtaseb (2005) reported that, fraud is one of the business risks related with any type of business activity. The types of fraud seen in hedge fund fraud cases are not exclusive to hedge funds.…”

Section: Comments On the Importance Of The Hedge Fund Industrymentioning

confidence: 99%

Portraits of five hedge fund fraud cases

Muhtaseb

Yang²

2008

Journal of Financial Crime

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PurposeThe purpose of this paper is two fold: educate investors about hedge fund managers' activities prior to the fraud recognition by the authorities and to help investors and other stakeholders in the hedge fund industry identify red flags before fraud is actually committed.Design/methodology/approachThe paper investigates fraud committed by the Bayou Funds, Beacon Hill Asset Management, Lancer Management Group (LMG), Lipper & Company and Maricopa investment fund. The fraud activities took place during 2000 and 2005.FindingsThe five cases alone cost the hedge fund investors more than $1.5 billion. Investors may have had a good opportunity for avoiding the irrecoverable costs of the fraud had they carefully vetted the backgrounds of the hedge fund managers and/or continuously monitored the funds activities, especially during turbulent market environments.Originality/valueThis is the first research paper to identify and extensively investigate fraud committed by hedge funds. In spite of the size of the hedge fund industry and relatively substantial level and inevitably recurring fraud, academic journals are to yet address this issue. The paper is of great value to hedge funds and their individual and institutional investors, asset managers, financial advisers and regulators.

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Section: Comments On the Importance Of The Hedge Fund Industrymentioning

confidence: 99%