7/31/2019 Hedge Fund Operational Due Diligence - Corgentum Blog Osiris

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2012 Corgentum Consulting, LLC

Hedge Fund Fraud Strikes New Jersey

Jersey City, NJ is now famous, or rather should that be infamous. In addition to serving as thelocation of Corgentum's headquarters Jersey City is now also in the news for being the former homeOsiris Partners, a hedge fund firm accused of fraud.

It wasreported todaythat New Jersey state officials have sued Osiris over charges that it defraudedinvestors and sold approximately $12 million worth of unregistered securities. The scheme allegedlydefrauded over 75 investors from 2009 to 2011. Investors seemed to have poured money into thefirm's flagship Osiris Fund, when it produced returns ofover 273%in 2009.

Earlier this year in Januaryit was reportedthat the Osiris partnerPeter Zuckhad fled with investorsmoney. Additionally, reports also indicated that the firm's former CEOMichael Spakwas the one whofirst report Mr. Zuck to the FBI.

Similar to many other hedge funds frauds such as Bayou, the Osiris Fund, did not preclude investorsfrom subscribing with a minimum of $1 million or more. Instead, the firm took a more retailmarketing approach with minimum investment of only $150,000. In an interview withFINalternativesin January 2010 Mr. Spak said, When we decided to go against the grain of thehedge fund industry and create a fund for all, not just the millionaire and billionaire clients, I knew in

my head and my heart it was the right business model.

Interestingly, it was also reported that a background check on Mr. Zuck revealed that beginning in1995 he spent over a year in a New Jersey prison after being found guilty of "misconduct bya corporate official." The current legal proceeding outline that Mr. Zuck was a three-time convictedcriminal. Another huge red flag.

We allege these defendants enriched themselves by pocketing at least $4 million of investors hard -earned money from the fund while they concealed substantial losses,Attorney General Jeff Chiesasaid in a statement.

This case clearly illustrates why we urge consumers to perform their due diligence before investing

their money, saidEric Kanefsky, acting director of thestate Division of Consumer Affairs.

The potential for hedge fund fraud is everywhere and investors need to perform initial and ongoingoperational due diligence to ensure that they are not involved in similar alleged fraudulent schemes.

Originally posted on the Corgentum Consulting blog atwww.Corgentum.com/blog

For More Jason Scharfman, Managing PartnerInformation info@corgentum.com

Corgentum.com |Blog| Twitter FeedTel. 201-360-2430

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