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We don’t know about you, but to us a young hedge fund manager earnestly promising the sun, moon and stars to investors only to fail, attempt unapproved moonshots to make up for it and fail again, all the while failing to mention any of that to investors, sounds like a pretty run-of-the-mill fraud. Especially when you add a few fibs about extraordinary performance the literal negation of which is closer to the truth and a bit of allegedly skimming off the top for personal use.

Not so to former federal prosecutor R. Michael Bullotta. In fact, he’s never seen such a thing in his entire career. Surely trying really hard and failing, even in the presence of a handful of little lies (you know, like allegedly claiming a 476.81% return when in fact one is nursing “catastrophic” losses), can’t possibly be fraud, even if it costs the investors he was lying to upwards of $27 million? I mean, this is America, after all.

R. Michael Bullotta, [Andrew] Middlebrooks' attorney, said Thursday in an email to The Detroit News, that the case is far from the usual fraud case in that his client was "legitimately" trying to make money for those who invested in his hedge fund, including his family and parents.

"The mistake Andrew and others working with him made was that, when some of the investments began to lose money, instead of admitting that fact, Andrew tried to right the ship with riskier investments that did not pan out, resulting in substantial losses to the fund," the attorney said. "His crime was in concealing those losses in order to buy himself and his partners more time to make his fund profitable."

Oh, so you acknowledge that it’s a crime, Mike? Are you sure you went to law school?

Bullotta said unlike convicted criminals such as Bernie Madoff, who lived "lavishly" off stolen money, his client "genuinely believed he could make his family and other investors money based on his education and experience in market investing."

"Andrew also invested and lost all of his own money and did not profit from his fund," said Bullotta.

A pity, for sure, although with representation like this, Middlebrooks won’t be needing much more than a quarter-million bucks for the next couple of decades.

Middlebrooks faces 20 years in prison, a $250,000 fine and up to three years of supervised release.

Feds say equity fund owner scheme defrauded investors of $27M [Detroit News]
Detroit Equity Fund Owner Charged with Defrauding Investors of Over $27 million [DoJ press release]

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