Usually our discussion of hedge fund frauds revolves around unscrupulous promoters who engage in some sort of fraudulent behavior against hedge fund investors.  Most of the time the fraud is based on some sort of ponzi scheme.  However, in the case reprinted below, the fraud was actually perpetuated against many hedge funds, including some funds with a significant amount of assets under management.  Even more incredible is that the fraud was perpetuated by a hedge fund attorney with a very impressive background.  While this is slightly different than hedge fund affinity fraud, it does show that frauds can be found on all scales and that hedge fund due diligence is important for both investors and hedge funds.  It is important, maybe now more so than ever, that hedge funds conduct proper due diligence on their counterparties when engaging in private placements and off-exchange transactions.  Please contact us if you have any questions on hedge fund due diligence. Continue reading →