Securities Industry Headlines: Convicted Hedge Fund Manager Martin Shkreli Gets Seven Years, Zohar Investment Funds File for Bankruptcy Protection, and Ex-Morgan Stanley Investment Adviser Named in $34M Securities Arbitration Loss Lands at Pinnacle

Martin Shkreli to Go to Prison for Seven Years
A federal judge has sentenced former hedge fund manager Martin Shkreli to seven years behind bars. Shkreli was found guilty of defrauding investors of his MSMB Capital Management hedge fund while manipulating the stock of his drug company Retrophin.

His defense team had fought for a lower sentence—12 to 18 months. They pointed out that ultimately none of the investors that Shkreli bilked lost money and he didn’t profit from his fraud. Prosecutors countered that, in fact, Shkreli had caused anywhere from $9M to $20M in losses.

A few days before his criminal sentence was issued, Judge Kiyo Matsumoto ordered that about $7.36M of the ex-hedge fund manager’s assets be surrendered, including a rare Wu-Tang Clan album that he purchased for $2M. Shkreli’s legal team plans to appeal the sentence.

Zohar Investment Funds Files for Chapter 11 Protection
Lynn Tilton, a New York financier, has filed for bankruptcy protection on behalf of her Zohar investment funds. Tilton cited litigation with global professional services firm Alvarez and Marsal, which manages the funds, and creditor and bond insurer MBIA.

The Zohar funds are set up to be collateralized loan obligations (CLOs) that package loans to beleaguered companies as securities. Investors had brought in approximately $2.5B to the funds.

During the first bankruptcy hearing related to the Zohar funds on Tuesday, an attorney for investors announced that his clients intended to challenge Tilton’s bankruptcy plan. Her bankruptcy filing seeks to stop lawsuits that have been in multiple venues, during which time the financier hopes to refinance or sell part of her portfolio companies and use the funds to pay back Zohar funds investors.

Over the years, lawsuits have been brought against the funds, Tilton, and her private equity firm Patriarch Partners, including a US Securities and Commission case accusing Tilton of defrauding investors of $200M related to the Zohar funds. That case was dismissed, as was a racketeering lawsuit against her in which the funds were the plaintiffs.

Ex- Morgan Stanley Broker Now Works with Pinnacle Investments
Investment advisor Ami Forte, who was let go by Morgan Stanley (MS) after she lost a Financial Industry Regulatory Authority ruling against the state of the late Home Shopping Network founder Roy Speer, is now with Pinnacle Investments LLC. In her role, based in Florida, Forte will serve as financial advisor and chief business development officer.

Forte, a former Morgan Stanly managing director, was let go by the broker-dealer after the panel ruled that she, a branch manager, and the firm are liable for numerous claims, including unauthorized trading in the estate’s case. The arbitration panel awarded the estate $34M in damages.

Fort then filed a wrongful termination suit against Morgan Stanley. She claims that she was the victim of gender discrimination. Her hearing is scheduled for later this year.

In February, FINRA notified Forte that it believes it has cause to recommend that disciplinary action be taken against her for misconduct. Forte’s attorney maintains that the broker did nothing wrong and she would combat any charges. Barron’s named her the leading Florida financial adviser in 2013.

At The SSEK Partners Group, we are here to help investors recoup their losses from financial fraud. Contact us today to schedule a free, no obligation consultation with one of our securities attorneys to explore your legal options.

New York financier Lynn Tilton puts Zohar funds into bankruptcy, Business Insider, March 12, 2018

Investors Challenge Tilton’s U.S. Bankruptcy Plan for Her Zohar Funds, US News, March 13, 2018

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