The Securities and Exchange Commission has been investigating the Dallas-based hedge fund Gryphon Partners for allegations of manipulative trading in the $14 billion-a-year market for private investment in public equity (PIPEs), and for misusing nonpublic information, according TheStreet.com.
The SEC alleges that the hedge fund found out about government investigations into publicly traded companies, shorted stock in those companies and then leaked the news on the Internet to help drive down their prices. The case is part of an ongoing investigation by the SEC into PIPEs that began 18 months ago with subpoenas to 10 hedge funds and 20 brokerage firms that deal in PIPEs.
SEC attorneys have requested numerous times, that Gryphon provide documentation about its PIPE deals and have met with Gryphon's attorneys a number of times, according to TheStreet.com.
Ben Rosenberg, the lawyer representing Gryphon said, "I do not anticipate an imminent enforcement action against Gryphon.
This is the second time now that the SEC is probing the $265 million fund. In April, Jonathan Daws, a former portfolio manager, pleaded guilty to a conspiracy charge that came from a plan involving top-secret information having to do with the government and its investigations of publicly traded companies.
Private investments in public equity are very often popular with hedge funds because of the market discount. However, many see these types of investments as a means for abuse by short-sellers.
Knight Trading, and Refco are other firms that face charges having to do with private investments in public equity.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.