Bloomberg reports that the SEC has voted internally to authorize charges against hedge fund billionaire Philip Falcone, who has struggled mightily in recent years, painfully and publically falling from grace.
The charges will likely go after Falcone and his Harbinger Capital for his controversial move in 2009 to take a 3 million loan from his Special Situations fund to pay personal taxes.
"The loan was disclosed in the fund's annual financial statement the following March. At the time he borrowed the money, clients were barred from pulling money from the fund. Falcone subsequently repaid the loan with interest."
The funds relationship with Goldman Sachs may also factor in the charges. Harbinger apparently "allowed Goldman Sachs, which at the end of 2008 had billion invested in two Harbinger funds, to redeem some money from the firm" even though other limited partners were locked in.
And finally, the government may bring charges alleging manipulation in its trading of various bonds of MAAX Holdings, a Canadian company. Fraud charges would mark the nadir for a man who rose from humble beginning to incredible success in the hedge fund industry, thanks mainly to his bet that the housing market would collapse. He had incredible ambitions, reflected mainly by his ill-fated investment in the LightSquared, a venture that is now in bankruptcy court. Now he'll have to turn his attention to vigorously defending himself.
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