A Case Study on Hedge Fund Fraud

Abstract

In this article, the author aims to present a case study focusing on the crucial details of a fraud perpetrated by a manager of a U.S. equity long/short hedge fund over the span of four years beginning in 1996. Though the names and facts have been modified to protect the identities of the parties involved, the article provides an interesting insight into the fraud that was perpetrated and on the way it finally came to light. It then presents the implications of the case, proposing seven possible area of careful investigation and due diligence focus that might have prevented the investors in that fund from losing hundreds of millions of dollars.