Wed, Feb 10, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

SEC accuses Commonwealth Advisors and founder of concealing $32m hedge fund losses from investors

Friday, November 09, 2012

amb
Walter A. Morales
Benedicte Gravrand, Opalesque Geneva - The U.S. Securities and Exchange Commission (SEC) charged a hedge fund manager with defrauding investors by hiding millions of dollars in losses suffered during the financial crisis from investments tied to residential mortgage-backed securities (RMBS).

This lawsuit reportedly follows a four-year long investigation.

Walter A. Morales and his firm Commonwealth Advisors Inc., located in Baton Rouge, LA, allegedly bought the lowest and riskiest tranches of a collateralized debt obligation (CDO) called Collybus. According to the SEC, Morales sold MBSs into the CDO at prices he had obtained four months earlier, while knowing that the RMBS market had declined precipitously in the meantime. As the CDO investments continued to perform poorly, Morales and his firm conducted a series of manipulative trades between the hedge funds they advised (called cross-trades) in order to conceal a $32m loss experienced by one of the funds in its Collybus investment. After the trades, Morales directed a Commonwealth employee to mark the securities at fair market value, which created a fraudulent $19m gain for the acquiring hedge fund at the expense of the funds that sold.

Morales and Commonwealth lied to investors about the amount and value of mortgage-backed assets held in the hedge funds, and they created phony internal documents to justify their false valuations, the SEC states.

Robert Khuzami, Director of the SECs Division of Enforcemen......................

To view our full article Click here

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. How Einhorn survived a nightmare year[more]

    From Bloomberg.com: Even when a hedge fund has an awful year, which was the case for David Einhorn's Greenlight Capital, there are lessons to be learned. Many funds would have had a tough time surviving a year like Einhorn experienced in 2015, when all the stars seemed to align against him and Green

  2. Legal - Hedge fund founder wins early release in U.S. insider trading case, Gramercy seeking $1.3 billion from Peru over land-bond dispute[more]

    Hedge fund founder wins early release in U.S. insider trading case From Reuters/Streetinsider.com: Former hedge fund manager Doug Whitman on Tuesday won a reprieve from serving the remainder of his two-year sentence for insider trading after several judges expressed skepticism that his 2

  3. Investing - David Einhorn finds a winner in Michael Kors[more]

    From Thestreetinsider.com: Greenlight Capital hedge fund manger David Einhorn took his lumps in 2015. The fund lost over 20 percent on the year amid bets gone bad being long a plunging SunEdison and short a couple high-flying FANG stocks. However, today Einhorn is again showing his stock picking pro

  4. Investing - Avenue Capital's Marc Lasry: We like European bank loans, Comment: A bunch of hedge fund managers are chasing the 'dream of crushing a major structural problem'[more]

    Avenue Capital's Marc Lasry: We like European bank loans From CNBC.com: European banks are under immense pressure, but at least one prominent hedge fund has found what it thinks is a good opportunity in the wreckage. Marc Lasry, co-founder and chief executive of hedge fund Avenue Capital

  5. Credit Suisse cherry picks hedge fund ideas[more]

    From FT.com: Credit Suisse Asset Management plans to cherry pick profitable concepts from hedge funds with the launch in Europe of a “best ideas” strategy. The investment arm of the Swiss bank said the strategy will separate it from other funds blighted by “overcrowding problems”. It comes at a time