Jefferies Financial Group is in the process of winding down its hedge fund, 352 Capital, following a lawsuit against a former portfolio manager over alleged fraud, according to a report by Bloomberg citing sources familiar with the matter.
According to Bloomberg’s sources, 352 Capital has started selling some of its asset-backed bonds over the past few weeks, and plans to sell more in the coming months. The fund aims to unwind its portfolio gradually to protect investors, the sources said.
Hildene Capital Management is reportedly advising on the process, with Jefferies’ Leucadia Asset Management, which backs 352, holding a non-controlling stake in Hildene since 2022.
Most of 352 Capital’s investments are in asset-backed securities, particularly whole business securitisations where franchise companies pledge most of their assets as collateral. Approximately three weeks ago, the fund sold $60m of bonds tied to Centerline Logistics Corp, a Seattle-based marine transport services company, previously known as Harley Marine Services, which refinanced these bonds last year as part of a larger $425m debt package.
The asset sales coincide with a lawsuit 352 Capital has filed against its former portfolio manager, Jordan Chirico, alleging that he directed the purchase of bonds from a company falsely claiming to operate thousands of water vending machines, knowing the machines didn’t exist. The lawsuit claims Chirico used 352’s funds to support the fraudulent company, partly to recover his own investment.
Other assets that 352 Capital may need to liquidate include bonds tied to FAT Brands, which owns restaurant chains including Fatburger, Johnny Rockets and Twin Peaks, and where Chirico currently works as head of debt capital markets.
