A federal jury in New York found Stephen Treadway, the former chief executive officer of Pimco Advisors Distributors and the former chairman of the board of the Pimco funds, guilty on Friday of permitting hedge fund Canary Capital Partners to market time the funds, in the Securities and Exchange Commission's civil lawsuit against him.
Canary market timed $4 billion worth of assets through 108 transactions between February 2002 and April 2003, the SEC said.
"Investing in a mutual fund is an act of trust in those who manage and invest your money," said Randall Lee, director of the SEC's Los Angeles office. "The evidence in this case showed, and the jury agreed, that defendant Treadway betrayed that trust and defrauded investors by allowing a single wealthy investor to engage in a trading strategy that was denied to ordinary investors."
Treadway has denied the allegations, and his attorney, Alan Levine, told Bloomberg News, "We are very disappointed with the jury's verdict."
Possible penalties and sanctions will be determined at a scheduled hearing on July 14 before U.S. District Judge Victor Marrero.