The Securities and Exchange Commission indicted Edward J. Strafaci, a former manager of a prominent convertible arbitrage hedge fund with Lipper & Co., with two counts of securities fraud and two counts of investment advisory fraud. In total, they carry a maximum prison term of 30 years and $2.5 million in fines. The firm is one and the same company where founder Kenneth Lipper lost millions of dollars running a hedge fund for the rich and famous, including Julia Roberts, Liam Neeson and former Federal Reserve Chairman Paul Volcker.

Noting that during the period in question, from 1998 through 2002, Strafaci earned $3.9 million in bonuses as a result of overstating the performance and capital holdings of four funds by as much as much as 49%, the SEC also ordered Strafaci, 45, to return all of his "ill-gotten gains."

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