US Federal prosecutors have charged San Francisco hedge fund manager Nicholas Mitsakos with fraud, alleging that he schemed to raise money for his fund by falsely representing past performance and overstating the value of assets under management.
Preet Bharara, the US Attorney for the Southern District of New York, announced charges of securities and wire fraud against Mitsakos alleging that from at least May 2014 through August 2016, he fraudulently solicited investments in a hedge fund that he had founded, Matrix Capital, by distributing marketing materials claiming that Matrix had millions of dollars under management and had achieved outsized returns since 2012.
Instead of investing all of the money though, Bharara alleges that Mitsakos, who is claimed to have secured almost USD2 million based on false representations, diverted approximately USD800,000 to cover personal expenses and lost more than two-thirds of the money he did invest.
Bharara says: “Nicholas Mitsakos, founder of Matrix Capital, allegedly promised huge returns and told would-be investors that he had ‘a little more than USD60 million’ in his hedge fund. But as alleged, Mitsakos essentially ran an imaginary portfolio, which just tracked the performance of certain stocks without actually having a financial position in them. Instead, Mitsakos allegedly spent much of his investors’ money on car payments, credit cards, and rent.”
Mitsakos has been charged with one count of conspiring to commit securities and wire fraud, one count of securities fraud, and one count of wire fraud. The conspiracy charge carries a maximum term of five years in prison. The securities and wire fraud charges each carry a maximum term of 20 years in prison. The charges also carry a maximum fine of USD5 million, or twice the gross gain or loss from the offence.
In a separate action, the SEC has filed civil charges against Mitsakos.
