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Lydia Capital - insurance (fraudulent?)

2008-06-20

Count of distinct funds: 1
Capital base: ?
Loss: $34M lost to fraud (alleged)

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stories: bizjournals.com, co.uk, boston.com

Conviction, 2009-04-08:

Per BizJournals:

A Massachusetts federal court has ordered a British man to pay $2.78 million in restitution, interest and penalties for orchestrating a scheme to defraud more than 60 investors who invested in his phony hedge fund operation based in Boston.

The Securities and Exchange Commission said Wednesday that Glenn Manterfield, a principal at Lydia Capital LLC, was originally charged in April 2007 for allegedly defrauding clients who had invested $34 million in a Lydia Capital fund — the so-called Lydia Capital Alternative Investment Fund.

In reality, Manterfield, a U.K. citizen, and an affiliate, Evan K. Anderson, failed to invest in a portfolio of life insurance policies — as originally promised — and instead used the money for their own personal gain. The SEC also said the duo lied about Lydia’s investment returns, invented business partners, glossed over Manterfield’s “significant criminal history” and generally misstated the nature of the investment firm’s assets.

Implosion, 2008-06-20:

We have been informed that Lydia is now in receivership, which can be confirmed by looking at the company's web site (it has been replaced with a court-ordered information page). Thus it seems the fund itself is certainly operating no more, so we are now considering them "imploded".

Original Ailing Entry, 2008-05-21:

This entry tracks a potential fraud. The Boston Globe article (from back in April 2008) has good preliminaries:

In a complaint filed late Thursday, the Securities and Exchange Commission charged fund manager Lydia Capital sold shares in a hedge fund to clients without disclosing that their investment process could eventually render their hedge fund's assets "either worthless or virtually worthless," the agency stated.

In all the hedge fund called Lydia Capital Alternative Investment Fund LP raised $33 million from at least 57 investors in Taiwan, according to the SEC and Massachusetts Secretary of State William Francis Galvin, who filed a similar action. Galvin also charges that the principals have charged the investors millions of dollars illegitimately.

...

The regulators charge Lydia and its principals participated in a complex scheme whose details still remain under investigation. The heart of the scheme allegedly centered on the funds' investments in "life settlement" securities, or the purchase of life insurance policies from individual holders for less than their face value. Typically these policies are sold when the holder no longer needs the coverage, though some carriers restrict when policies may be resold.

This page has some more perspective on the case:

It sounds open and shut, but it isn't. In fact the question of whether owners of life insurance policies have the right to sell the policies, and under what circumstances, is currently one of the hottest issues being debated by the National Association of Insurance Commissioners (NAIC). Persons who purchase life insurance have a long-recognized right to sell their policies to third parties, proponents of such transactions say. If they have that right, why should the insurers ask whether that is their intent and claim the right to rescind if the answer provided is incorrect? Insurers respond that life insurance is designed to protect the families and businesses of the insured, not to provide windfall profits to investors.

It seems something of a grey area was being exploited.

More recently,

The High Court has frozen around GBP 500,000 of assets held in the UK belonging to Glenn Manterfield of Sheffield, who the SEC has accused of conspiring with a US citizen to defraud investors in Lydia Capital, a US hedge fund.

It certainly seems the investigation is expanding.

permalink to this record | forum thread


Comments:

bad_santa at 07:15 2008-06-16 said:
To the owner of this site,

First, I'd like to say that I have enjoyed your site. It has been, until now, very informative.

That said, it seems that you have your facts completely wrong and you are currently misrepresenting an entire sector in the hedge fund industry.

Life Settlements is, and will continue to be, a legitimate asset class. Moreover, there are plenty of legitimate and highly regarded funds in this sector. The biggest being an Austrailian fund focused on the US insurance market that has accumulated over $1B in assets under management in the past 24 months ($500M coming from institutional investors). Please refer to their site: http://www.lifesettlementsfund.com/

In addition, there has been zero fraud discovered with regards to Lydia Capital. As a matter of fact, the portfolio has been turned over to a Receiver and the portfolio has actually been evaluated as profitable. The facts of the case do not lead to fraud and soon the managers involved will be vindicated. If you really want to point the finger at someone, maybe blame the US and UK authorities for interfering in a profitable and legitimate investment scheme, and for causing so many problems for the 57 Taiwanese investors who were involved--not to mention the financial planners involved who sold the product. Their pain and frustration, unfortunately, continues because the Receiver seems to like to milk profits far more than returning the client's money.

Everything that I'm saying can be qualified with just a little bit of investigation. Again, I enjoyed your site, but then when you posted something about a fund that I happen to know personally, and those "facts" you posted aren't really facts but opinons by corporate owned newspapers, then your site became a little less interesting and more typical trash we might find in any newspaper in the US or UK.

It's one thing to try and make people aware, but when your means can't justify your ends, what's the point?!?!

Sincerely, Bad Santa Hong Kong Permalink

bad_santa at 22:25 2008-06-17 said:
The fund is currently, slowly, being liquidated. It has been evaluated in the black by some +30%.

Not bad considering the fund is only 2 years old!!!!

All the investors will get their money back!!!!

Get you facts straight, and at least remove Lydia Capital from your "ailing" list--unless you consider making money a sick idea. Permalink

Aaron at 21:52 2008-06-29 said:
test first post Permalink
Dollar_guy at 21:56 2008-06-29 said:
test first post
Working Aaron...... Permalink
Aaron at 22:00 2008-06-29 said:
Sweet... now, feel free to run through all the imploded/ailing funds and comment on them to your heart's content ;)

Actually if you have any intel on updates, especially to the ailings, that would be a great thing to post. Permalink

Dollar_guy at 22:07 2008-06-29 said:
Sweet... now, feel free to run through all the imploded/ailing funds and comment on them to your heart's content ;)

Actually if you have any intel on updates, especially to the ailings, that would be a great thing to post.

I will.. and thanks again for the forum... hope everything is well.... Permalink
Aaron at 20:42 2008-07-05 said:
bad_santa:

Jesus christ man, chill out. First of all, we never said all of "life settlements" as an asset class is illegitimate. Get your reading glasses out and try again.

Second, we never expressed as more than speculation that Lydia is "fraudulent". All we could conclude from the articles is that there were accusations of such, and the fund was being put in receivership.

If you have any evidence to the contrary, please present it, don't just mouth off. Permalink

bad_santa at 00:03 2008-07-09 said:
bad_santa:

Jesus christ man, chill out. First of all, we never said all of "life settlements" as an asset class is illegitimate. Get your reading glasses out and try again.

Second, we never expressed as more than speculation that Lydia is "fraudulent". All we could conclude from the articles is that there were accusations of such, and the fund was being put in receivership.

If you have any evidence to the contrary, please present it, don't just mouth off.

You never said it but you cut-n-paste garbage like this: "It sounds open and shut, but it isn't. In fact the question of whether owners of life insurance policies have the right to sell the policies, and under what circumstances, is currently one of the hottest issues being debated by the National Association of Insurance Commissioners (NAIC)."

WTF does this have to do with Lydia?

My evidence is this shitty web-site! This site is just like the US corporate news in the States: Spin, spin, spin, spin with a little disinformation to confuse the sheeple.

Get a real job!!! Permalink

Aaron at 00:56 2008-07-09 said:
Oh I see. So now including background information on a directly-related controversy is bad, especially if you disagree with the author's bias.

I really have to wonder how you're connected to this fund. I take it you have a direct, maybe high-level interest in it and are in hot water.

Regardless, you never provide any concrete counter-argument to the perceived misinformation, so your behavior is pretty worthless and immature. We are just supposed to take your reference to ANOTHER fund in the same market being questioned , plus your assertions, as "proof"?

You're probably damaging the reputation of Lydia in the eyes of anyone who is reading this, especially if this is the best one of their "defenders" can do!

By the way, you are welcome to post real information but any more childish behavior will result in a ban. Permalink

There are more posts. Click here to view the whole thread

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Important: This fund is on our list of hedge funds that have "imploded" (see also ailing lenders). However, please note that "imploded" is a somewhat subjective. The "imploded" list contains hedge funds (or other unregulated and autonomous speculative investment funds) which have gone through some sort of permanent adverse change. This is a somewhat subjective call, and does not necessarily mean total shutdown or bankruptcy. It can also mean steep and rapid mark-downs in net asset value; or abnormal "bail-out" by corporate parents or peers in order to avoid write-downs and provide liquidity. The funds are of any type and sector.