A few years back, a not-so-little hedge fund called Visium Asset Management made what proved to be a rather large a mistake. It told trader Jason Thorell that it thought he was getting paid exactly what he was worth, his own contrary opinions on the matter notwithstanding. This was not a smart thing to do to a man whose job was soliciting overly generous valuations from overly solicitous prime brokers, and who might just decide that the best way to get paid was to turn over 200 hours of conversations about the above practices with co-workers to the authorities. Because once the authorities start looking into a little mismarking among friends, they tend to think, “While we’re here, let’s take a look around,” and then find that there might have been a little bit of inside dirt circulating, which is music to the ears of the U.S. Attorney in your jurisdiction, which because you’re a hedge fund is Manhattan, whose U.S. Attorney just happens to be on a crusade to save his legacy by proving that insider trading still exists, and thinks your firm might be the perfect object lesson thereof. Next thing you know Visium Asset Management is out of the business of managing hedge funds—but it is not out of business, full stop. Because after the aforementioned nightmare comes to an end, you get to spend two years negotiating with the SEC about how much a defunct hedge fund should have to pay for all of the above. Only then can you finally, mercifully and actually go out of business.
On Tuesday, Visium agreed to settle a range of SEC charges and forfeit $4.7 million in illegal trading profits and pay more than $5.4 million in fines and interest. The company didn’t admit or deny the allegations by the SEC…. The commission also found that Visium Chief Financial Officer Steven Ku didn’t properly supervise two hedge-fund employees who were involved with the illicit trades.
Oh, wait: One last thing:
The SEC said Visium agreed to settle charges that its employees inflated the value of its holdings to generate inflated fees.