Chetan Kapur, sole managing director of ThinkStrategy Capital Management, was recently accused of hedge fund fraud and intentionally misleading investors about the positive returns of the fund. The illegal and fraudulent scheme ran from 2002 to 2010.
In a recent indictment, Kapur was charged with investment adviser fraud, wire fraud and securities fraud. The official indictment was handed down by Manhattan U.S. Attorney Preet Bharara and was unsealed in mid July. In it, Kapur was accused of persuading investors to buy into the fund through omissions and misleading or outright false statements about the fund's performance.
Kapur and the U.S. Securities and Exchange Commission came to a settlement in November about other claims that the investment firm intentionally deceived its investors. In this settlement, the SEC claimed that Kapur invested with Arthur Nadel's Valhalla and Victory funds as well as Samuel Israel's Bayou Superfund, both of which have since been proven not be fraudulent funds, and thus was guilty of defrauding investors. Kapur and ThinkStrategy neither admitted to nor denied the claims in the SEC settlement. In the more recent indictment, Nadel and Israel were not specifically mentioned.
The indictment has a total of seven counts, and if he is convicted of all of them, he faces a maximum of 125 years in prison. Kapur told ThinkStrategy investors that the funds had accounts totally more than $360 million, when in fact by the time it collapsed it had less than $125,000 available. At its peak in 2008, ThinkStrategy managed $520 million in total assets.
Source: Bloomberg, "ThinkStrategy's Kapur Indicted For Securities Fraud," Patricia Hurtado, July 17, 2012