Three Fairfield County men who were employed by a Ridgefield-based hedge fund have been charged with conspiracy, securities fraud and wire fraud, U.S. Attorney David Fein announced Tuesday.
According to the 19-count indictment, Bart Gutekunst, 61, of Weston and Ridgefield residents David Bryson, 44, and Richard Pereira, 40, worked for New Stream Capital, LLC, and defrauded its largest investor in order to keep those investments secured.
“As alleged, fearing the loss of their fund’s largest investor, these defendants orchestrated a scheme to deceive investors in order to obtain and maintain investments,” Fein said in a press release. “The U.S. Attorney’s Office and our many partners on the Connecticut Securities, Commodities and Investor Fraud Task Force are committed to protecting investors and the integrity of American capital markets.”
The men—who each pleaded not guilty—are each charged with one count of conspiracy, 10 counts of securities fraud and eight counts of wire fraud, according to the release.
"The conspiracy charge carries a maximum term of imprisonment of five years, and the securities fraud and wire fraud charges carry a maximum term of imprisonment of 20 years on each count," according to the release.
FBI Agent Kimberly Metz was also involved in handing down the indictment.
“It goes without saying that investing carries certain risks,” Mertz said in the release. “Those risks, however, should not include any chance that hedge fund managers or other investment professionals are lying to or deceiving their investors about the current state of investments. Investors have a right to full disclosure. Today’s arrests underscore the FBI’s continuing commitment to investigate those who provide material misrepresentations to investors.”
The indictment alleges the hedge fund launched a Cayman Islands fund and a U.S. fund in November 2007, at the same time it announced an existing Bermuda fund would be closing and investors needed to move money from that fund to the Cayman Islands fund.
Upon this announcement, New Stream's largest investor placed a redemption on its whole investment in the Bermuda fund, according to the release.
"At risk of losing their largest investor, it is alleged that Bryson, Gutekunst and Pereira set in motion a scheme to secretly keep the Bermuda dund open and give priority to Bermuda Fund investors in an effort to reverse the redemption," according to the release. "As part of the scheme, Bryson, Gutekunst and Pereira had New Stream staff secretly reorganize the fund structure so as to effectuate the priority change."
"The indictment further alleges that New Stream failed to inform investors who had transferred from the Bermuda Fund into the Cayman fund that the Bermuda fund was remaining open or that it was being given priority over the Cayman fund," according to the release. "Moreover, New Stream continued to market New Stream to investors by concealing from them the magnitude of the actual pending redemptions and by using deceptive marketing materials that failed to disclose the existence of New Stream’s Bermuda fund."
Bryson and Gutekunst were released on $5 million bonds and Pereira was released on a $300,000 bond, according to the release.