Man Financial Sued for Fund's Collapse

Man Group's brokerage unit, Man Financial, and seven of its employees are being sued for fraud and racketeering, in an effort to recover assets lost by investors in a hedge fund that collapsed, Bloomberg reports.

Man Financial helped hedge fund Philadelphia Alternative Asset Management hide more than $140 million in trading losses in a brokerage account with the firm. In so doing, Man Financial violated the Commodity Exchange Act and the Racketeer Influenced and Corrupt Organizations Act (RICO) by allowing the fund to hide its losses.

"Man Financial and its employees enabled and facilitated the wrongful conduct," said receiver Clark Hodgson in a complaint filed in Philadelphia U.S. District Court. What we have here is "a pattern of racketeering activity, which included numerous acts of fraud."

"Under RICO, you're not just talking about damages, you're talking about treble damages," said Michael Greenberger, a law professor at the University of Maryland and a former head of trading and markets at the CFTC. "It makes it that much more attractive for the defendant to settle, because if you litigate the case, your damages could escalate."