Ex-Mutual Fund Head Sentenced to 4 Years in Prison for Advisor Fraud

Abarbanel also owned and controlled the investment advisor to the fund, Williams said. In that capacity, Abarbanel made materially false representations and omitted material information to the largest group of investors about how their money would be invested, according to Williams.

Among other things, Abarbanel falsely represented that investments in his fund would be placed “primarily” in short-term U.S. Treasury securities, when instead of investing in such securities directly, Abarbanel and his “confederates transferred the investor funds to counterparties controlled by or otherwise closely associated with Abarbanel for use, among other things, in trading not authorized by the Fund’s offering documents,” according to Williams.

Abarbanel also represented that, to enhance income, the fund intended to invest in securities lending transactions and also repurchase and reverse repurchase agreements, Williams said.

Abarbanel represented, as to those transactions, that the fund would receive and maintain collateral in the form of Treasury securities that could be quickly liquidated in case a counterparty defaulted on its obligations, according to Williams. Abarbanel, however, failed to obtain for the Fund the promised collateral to secure the investments.

In or about May and June 2021, Abarbanel failed to honor a redemption request by the investor group for the entirety of its outstanding investment, totaling more than $100 million, instead placing conditions on the redemption that were contrary to the fund’s offering document and its practices with prior redemptions, according to the prosecutor.

On or about June 16, 2021, the fund transferred over $10 million in investor funds from the fund to a personal brokerage account of an attorney who worked with the fund, Williams said.

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