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North Carolina Lawyers Weekly Top Settlements and Verdicts (2013) - Investment Adviser Fraud - $2.95 Million

Settlement amount: 
$2.95 Million

Jim Roberts was lead counsel for the plaintiff.

The case referred to above concluded with a confidential settlement. Many financial cases in litigation result in confidential settlements. This means that we cannot publicly discuss the terms and conditions of those settlements, including what the settlement amounts were. We can, however, provide descriptions of the types of cases we are working on now – which are comparable to those we have worked on before. The following summary relates to a case that we are either actively litigating or that we have litigated in the past.

Securities Fraud and Negligence Claims Against Hedge Fund Administrator

See Court Order and Opinion from Bradshaw v. SS&C Technologies, Inc., Case No. 14-CVS-14445 (N.C. Bus. Ct.). In this case, the plaintiffs were investors in a hedge fund located in Charlotte (sometimes called the “Fund”). It is alleged that the hedge fund outsourced its administrative and accounting functions to SS&C Technologies – a company that provides specialized financial services to hedge funds. Over time, the hedge fund manager began making (purported) investments in non-publicly traded companies. These investments, Fund investors were told, were profitable. SS&C accounted for these profits, and reported the Fund’s progress out to investors via monthly capital statements under its name.

It is alleged that the Fund’s investment claims were false. For instance, it is alleged that the Fund could not demonstrate its ownership of many of the investments, and that it could not demonstrate that the investments were profitable as claimed. The hedge fund manager pled guilty to securities fraud in 2012, and he is currently serving a federal prison term.

The plaintiffs allege that the hedge fund manager’s fraud could not have occurred without the cooperation and assistance of SS&C. For instance, plaintiffs allege that SS&C did not obtain documentation that the Fund’s investments were legitimate and real – meaning SS&C did not obtain share certificates, loan agreements, or account statements for these forms of investments. Plaintiffs also allege that SS&C “managed” the Fund’s accounting by recording investments at zero cost (thus inflating their reported “value”), by shifting investment “basis” to make it appear that the “zero cost” investments had been paid for, and by improperly denominating the nature of certain investments (e.g., calling a loan a stock investment). Plaintiffs make other similar allegations, which generally assert that SS&C helped cover up and perpetuate the Fund manager’s fraud.

The plaintiffs, it is alleged, relied on SS&C’s presence as a form of “gatekeeper” or impartial “referee” at the Fund. The plaintiffs also allege that they relied on the financial information that SS&C provided them to make investment decisions regarding the Fund. The plaintiffs contend that SS&C was, at best, recklessly indifferent to the fraud that was taking place at the Fund.

This case is presently pending in the North Carolina Business Court. Jim Roberts represent the plaintiffs in this action.