Our correspondent Michael Bronson reports that former hedge fund manager Gad Grieve was targeted in a Mafia style hit job, in 2008. The party that ordered the contract was an investment firm which wanted to pressure Grieve to violate a fund lock clause and provide the firm with early redemption of its allocation.In 2008 Grieve invoked a two-year lock up provision in its fund, which delayed payouts to investors in turbulent markets. The investment management firm panicked and initiated what was colloquially known as a code red.
According to a confidential document, the hit facility was offered by a research firm which branded itself as a company that could warn firms about fund blowups long before they occurred. The research firm would use fabricated information to to falsely implicate targeted hits for fraud and regulatory violations.The Securities Exchange Commission (SEC), concerned about re-establishing its credibility after the Madoff scandal, welcomed information that would incriminate traders or investment managers on Wall Street. The researcher who executed the “hit” would receive payment from two sides: the investment company who was initiating the contract and the SEC.
Smaller firms with $500 Million AUM or less, in many cases didn’t have the resources to fight a full blown legal battle with the SEC, which often could run into millions of dollars. The result was that they buckled and pushed for a quick settlement, even if they were innocent and had to admit guilt. It was an easy way for traders to eliminate the enemy. A spokesman from an established banking firm on Wall Street said, “No one will say it out loud or admit it, but everyone knows, if you don’t like a fund manager just turn the
regulators on him.”
In 2009 the SEC filed a civil action against Grieve and his firm, Finvest Asset Management. The suit was never legally served on Grieve. The SEC chose not to litigate the matter with Finvest Asset Management LLC. Grieve exited the investment industry in 2009 however, a few years later the SEC later took out exparte default judgements against the parties. According to people close to him, Grieve has no plans to return to the investment industry and is pursuing other interests. He could not be reached for comment.With the appointment of a new SEC chief, Chairman Jay Clayton, practitioners on Wall Street say that the SEC has become more discerning with the information it receives. Accordingly, the-under-the-radar Mafia
style hit-operation was effectively shut down. People in the know, say that the scheme would probably have never have been formerly sanctioned by SEC officials. The official line is and always will be, “Information is always welcome, but we will investigate it thoroughly.”
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http://www.webnewswire.com/2018/10/05/mafia-styled-hit-service-on-fund-managers/