The former manager of PDP Capital, a Florida-based hedge fund, was recently sentenced to more than five years in prison. The man allegedly defrauded investors out of more than $1.6 million. In addition, he also was accused of wire fraud. The man allegedly issued a false statement that reflected phony profits in an investor's account.
Many hedge funds set a minimum one-year lock-up period during which investors cannot withdraw their funds. That might seem like a scary prospect, especially considering the aggressive investment strategy followed by many hedge funds. Although that strategy may yield enormous gains, it also can expose investors to a great deal of investment risk.
Hedge funds often are privately owned and operated, but like almost all securities sold in the United States, they still are subject to applicable securities laws. For that reason, it may be a good idea to consult with a securities fraud attorney before making a hedge fund investment.
Source: hedgeco.net, "Florida Man Sentenced To Over 5 Years For hedge Fund Fraud," Sept. 17, 2013