BOSTON, Massachusetts – Two former Boston-area hedge fund managers were sentenced to prison for conspiring to mislead investors into investing more than $500 million in their fraudulent hedge fund business.
Gabriel Bitran, 70, of Newton, a former professor and associate dean of the Massachusetts Institute of Technology (MIT) Sloan School of Business, and his son Marco Bitran, 40, of Brookline, a Harvard Business School graduate and money manager, were each sentenced by U.S. District Court Senior Judge Mark L. Wolf to 45 months in prison, three years of supervised release, forfeiture and restitution of more than $11 million on December 14, 2015.
From 2005 through 2011, Gabriel and Marco Bitran solicited and maintained investors in their hedge fund and investment advisory businesses through false claims that, for eight or more years they had delivered average annual returns between 16 and 23%, with no down years.
The Bitrans falsely told investors that the money in their hedge funds would be invested according to a complex mathematical trading model developed by Gabriel Bitran and based upon his MIT research on optimal pricing theory. The Bitrans also routinely concealed from investors that certain of their hedge funds were simply “funds of funds,” that is, hedge funds in which values of investments are determined by the value of investments in other independently managed hedge funds, some of which were themselves broad-based funds of funds.
By means of their fraudulent representations, the Bitrans induced investors to entrust over $500 million to their businesses. From this money, the Bitrans paid themselves millions of dollars in management fees.
In the fall of 2008, several of the Bitrans’ hedge funds had disastrous losses, resulting in investors losing 50–75% of their principal in many instances. Nonetheless, as their funds were experiencing these losses, Gabriel and Marco Bitran redeemed approximately $12 million of their own money from these hedge funds, while deferring other investors’ requests for redemption. The Bitrans thereby extracted much of the value of their own investments while leaving other investors to suffer more losses as the funds’ values declined precipitously.
In January 2009, while investigating potential victims of the Madoff fraud, examiners from the United States Securities and Exchange Commission (SEC) learned of the Bitrans’ performance claims and asked for supporting documentation. In response, the Bitrans made false statements to the SEC examiners and provided fabricated records. At the same time they were lying to investigators and investors, Gabriel and Marco Bitran privately admitted to each other that they had made false statements to investors and owed them restitution.
Gabriel and Marco Bitran were each convicted of conspiracy to commit securities fraud and investment adviser fraud, 18 U.S.C. § 371 and 15 U.S.C. § 80b-6(1), 17 C.F.R. § 275.204A-1(a)(1)(i), and 18 U.S.C. § 1348.
The Bitrans’ crimes were uncovered after several of their hedge funds had disastrous losses, resulting in investors losing 50–75% of their principal in many instances. Despite these losses, the Bitrans continued to solicit and maintain investors in their hedge fund and investment advisory businesses through false claims.
The Bitrans were each sentenced to 45 months in prison, three years of supervised release, forfeiture and restitution of more than $11 million on December 14, 2015.
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Key Facts
- State: Massachusetts
- Category: Fraud & Financial Crimes
- Source: DOJ Press Release â†â€â€
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