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Alpha Beta cries $40m fraud against Pursuit Investment

Monday, June 28, 2010
Opalesque Industry Update – The New York-based Alpha Beta Capital Partners LP has filed a $40m damage claim against Pursuit Investment LLC over what it described as fraudulent representations involving Alpha Beta’s exposure into two Pursuit hedge funds, media reports said.

Alpha Beta charged Pursuit, which is based in Stamford, Connecticut, of inflating the net asset values of Pursuit Capital Management Fund LLP, and Pursuit Opportunity Fund LLP, so it can generate millions in management and incentive fees, Bloomberg reported.

In its filing before the New York State Supreme Court in Manhattan, Alpha Beta said, “By pricing the Pursuit Funds’ assets essentially arbitrarily to make their performance look good, the company made it appear as though the value of the Pursuit Funds’ portfolios were continually rising, even in a market that was declining precipitously, when in fact their value was not.”

It was added that Alpha Beta made its first investments into Pursuit back in 2006 but only discovered the alleged fraud in June 2009 when it asked for redemptions for its investments. The firm said it found that Pursuit claimed that Alpha Beta’s investments were worth $40m when in fact only worth $7m, said Law360.com.

The lawsuit named Pursuit Investment principals Anthony P. Schepis and Frank Canelas Jr. as co-defendants, as well as Clayton IPS Corp., and Eisner LLP, the auditors for the Pursuit funds. Alpha Beta claimed the fraud could not have been pulled off by Pursuit without the assistance of Clayton and Eisner.

Based on the court papers, Schepis and Canelas reportedly assured Alpha Beta that "everything was fine" and that the portfolio was "fairly marked" whenever it asked for update on its investments.

Pursuit lifted its redemption gates in June 2009 after suspending them in 2008 at the height of the global financial crisis.
-Precy Dumlao

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