{"id":5333,"date":"2012-06-29T00:00:00","date_gmt":"2012-06-29T05:00:00","guid":{"rendered":"https:\/\/institutionalinvestorsecuritiesblog.blawgcloud.com\/2012\/06\/harbinger_capital_partners_llc"},"modified":"2022-04-28T13:36:24","modified_gmt":"2022-04-28T18:36:24","slug":"harbinger-capital-partners-llc","status":"publish","type":"post","link":"https:\/\/www.investorlawyers.com\/blog\/harbinger-capital-partners-llc\/","title":{"rendered":"Harbinger Capital Partners LLC and Hedge Fund Adviser Philip A. Falcone Face SEC Securities Charges Over Client Asset Misappropriation and Market Manipulation Allegations"},"content":{"rendered":"

The SEC has filed securities charges<\/a> against Harbinger Capital Partners LLC and its owner Philip A. Falcone. The SEC is accusing them of a number of charges, including engaging in market manipulation and client asset misappropriation. Also facing SEC charges for allegedly helping them is former Harbinger COO Peter A. Jenson.<\/p>\n

The Commission accused Falcone, who is a hedge fund adviser headquartered in New York, of paying his taxes with fund assets, getting involved in a \u201cshort squeeze\u201d that was not legal to manipulate the prices of bonds, and secretly favoring some clients to the disadvantage of other clients. The SEC contended that after short selling equity securities during a period that was restricted, Harbinger then illegally purchased the same ones in a public offering. <\/p>\n

The Commission claims that rather than use legal means to cover the $113.2M in personal taxes that he owed, Falcone fraudulently used fund assets by borrowing that amount from Harbinger Capital Partners Special Situations Fund, L.P. (investors had been suspended from redeeming from this fund). The regulator says that all of this was done without investors\u2019 permission. <\/p>\n

The Commission also contends that Harbinger and Falcone waited about five months to reveal the loan because they were worried that making the hedge fund adviser\u2019s financial state known could negatively impact both investors\u2019 withdrawals and Falcone\u2019s ability to bring in more investments for the other Harbinger funds. <\/p>\n

The SEC is accusing Harbinger and Falcone, with Jenson\u2019s help, of making a number of key omissions and misrepresentations in getting legal counsel and when communicating with investors about: the financing options that had been available to Falcone, the reasons why he needed the loan, the fund\u2019s ability to not harm investors while covering the loan, the loan\u2019s conditions and terms, and the part that Harbinger\u2019s legal counsel played. Falcone paid back the loan last year after the SEC started investigating this matter. In connection with this alleged scam, the SEC separately filed and settled cease-and-desist and administrative proceedings against Harbinger. <\/p>\n

The Commission also filed another civil case contending that between \u201806 through early \u201808, two Harbinger entities and Falcone engaged in market manipulation of distressed high-yield bonds issued by MAXX Holdings Inc. The three of them allegedly took part in a \u201cshort squeeze\u201d that was not legal and, on Falcone\u2019s order, Harbinger bought a huge position in the bonds in 4\/06 and 6\/06.<\/p>\n

When he heard rumors that a financial services firm was shorting the bonds and suggesting that its clients follow suit, Falcone allegedly decided to retaliate by telling the funds that were managed by Harbinger to purchase every bond that was available, which caused the funds\u2019 stakes to go up about 13% more than what was actually available. <\/p>\n

The financial services company and its clients were then told that they had to settle their MAAX short sales that were outstanding, which was not really possible given the circumstances. As the financial services company went on to bid for the bonds every day, the bond price doubled. Falcone is accused of then taking part in transactions, at prices that were both inflated and arbitrary, with a number of short sellers. <\/p>\n

SEC Complaint: Harbinger Capital Partners LLC; Philip A. Falcone; and Peter A. Jenson <\/a>(PDF)<\/p>\n

SEC Complaint: Philip A. Falcone, Harbinger Capital Partners Offshore Manager, L.L.C., and Harbinger Capital Partners Special Situations GP, L.L.C.<\/a> (PDF)<\/p>\n

\nMore Blog Posts:<\/strong>
\nHedge Fund Manager Raj Rajaratnam Ordered by SEC to Pay $92.8M Penalty for Insider Trading,<\/a> Stockbroker Fraud, November 12, 2011 <\/p>\n

Accused Texas Ponzi Scammer May Have Defrauded Investors of $2M, Stockbroker Fraud<\/a>, August 3, 2011 <\/p>\n

Montford Associates to Pay $650,000 in Securities and Exchange Commission Penalties Over Failure to Disclose Payments from Hedge Fund, Institutional Investor Securities Blog, May 1, 2012 \n<\/p>\n

Continue Reading \u203a<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The SEC has filed securities charges against Harbinger Capital Partners LLC and its owner Philip A. Falcone. The SEC is accusing them of a number of charges, including engaging in market manipulation and client asset misappropriation. Also facing SEC charges for allegedly helping them is former Harbinger COO Peter A. Jenson. The Commission accused Falcone, […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[3748,4025],"tags":[],"class_list":["post-5333","post","type-post","status-publish","format-standard","hentry","category-hedge-funds","category-highyield-bonds"],"yoast_head":"\nHarbinger Capital Partners LLC and Hedge Fund Adviser Philip A. 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