Hedge fund manager in fraud investigation

A Long Island asset manager is at the centre of a legal investigation for fraud

NEW YORK & WASHINGTON, DC - US authorities are investigating an alleged hedge fund fraud involving fund manager Corey Ribotsky, who runs the NIR investment fund.

FBI investigators, regulators from the Securities and Exchange Commission (SEC) and prosecutors at the New York US attorney's office in Brooklyn have not charged Ribotsky but are probing NIR, where Ribotsky is responsible for around $770 million of clients' funds.

The SEC has subpoenaed the NIR, requesting yearly, monthly and quarterly performance returns stretching from the present back to January 2004, in addition to evidence of NIR's internal performance calculation, pitch books, investor presentations, letters and emails.

Funds under Ribotsky's control have reported consistently positive returns. One of his funds, AJW Qualified Partners, reported more than 8% interest for the first nine months of 2008, while NIR's funds had positive returns in 114 out of 117 months.

Another fund, called AJW Offshore II, reported annual returns of more than 16% for the past three years, and a 10% return in 2008, which compares with an average 21.6% decline of hedge funds reported in a Barclay Hedge report using an index of 2,700 hedge funds.

Ribotsky and one of his hedge funds have already been sued several times in the past year by investors claiming that they were improperly prevented from making redemptions last autumn.

In one New York state court-filed lawsuit against Ribotsky and NIR, Gerald and Michael Tucci said that, when they asked to redeem about $1.5 million, Ribotsky instead gave them securities in a small company and told them that the value of the shares was equal to that of their investment. But when the investors tried to sell the shares, they discovered they were nearly worthless, according to the lawsuit.