According to prosecutors, Michael Balboa, an ex-Millennium Global Investments Ltd. portfolio manager, took part in a 10-month financial scam that involved marking up the Nigerian sovereign debt in funds he oversaw.
The federal government contends that Balboa and three unnamed co-conspirators engaged in a scheme in which he provided bogus mark-to-market quotes to a valuation agent that then inflated the market prices at month-end for Nigerian warrants. As a result, one fund’s total valuation for the Nigerian warrants was able to go from over $12 million at the start of 2008 to over $84 million in August of that year. Balboa’s Millennium Global Emerging Credit Fund is now insolvent.
He allegedly overstated the value of the securities positions and illiquid securities in the funds, which caused him to earn performance and management fees that were not legitimate. Balboa also purportedly lied to investors repeatedly about how the funds were faring.
In the process of perpetuating the scheme, says the prosecution, Balboa made $6.5 million for servicing the fund. This amount was determined by the fund’s performance.
In 2010, Balboa allegedly tried to get those that helped him commit the scam to cover up his crimes. One of the men accused of helping him is Gilles De Charsonville, a BCP Securities LLC broker. De Charsonville and two other co-conspirators are working with prosecutors and will testify against Balboa on the government’s behalf. They haven’t been charged with any crimes.
Meantime, Balboa is charged with numerous criminal counts, including securities fraud, conspiracy, investment adviser fraud, and wire fraud. His defense attorney, however, is disputing the allegations, claiming that Balboa cultivated the skill to set illiquid asset valuations and he provided investors with literature letting them know that he had the authority to modify valuations. The lawyer says that Balboa’s customers were experienced institutional investors that were well-versed in the market and could not be easily scammed.
In 2011, the US Securities and Exchange Commission filed civil charges against Balboa and De Charsonville over the same fraud. The complaint says that Balboa gave DeCharsonville and another broker bogus prices that they could give to the Fund’s auditor and outside valuation agent. The regulator says that by overstating the overall net asset value of the fund and its returns, Balboa was able to bring in at least $410 million in new investments, make millions in inflated performance and management fees, and deter approximately $230 million in redemptions that were eligible.
Our securities lawyers represent institutional investors that have suffered losses in financial scams and other types of securities fraud. Contact SSEK today.
Ex-Millennium Manager Inflated Funds’ Value, Prosecutor Says, The Washington Post, June 11, 2013
SEC CHARGES HEDGE FUND MANAGER AND BROKER WITH MULTI-MILLION DOLLAR OVERVALUATION SCHEME, SEC, December 2, 2011
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