Enforcement Action Against Hedge Fund Managers Who Served as Feeders in Massive Ponzi Scheme

Florida-based hedge fund managers and their firms fraudulently funneled more than a billion dollars of investor money into a Ponzi scheme operated by Minnesota businessman Thomas Petters. Petters sold promissory notes to feeder funds, representing that investor money would be used for retail purchase order inventory financing. Defendants misled investors about the security of their investments, and took steps to conceal the fraud when Petters began to default. Ultimately, defendant Prevost was sentenced to 7½ years in prison, and Harrold received 5 years.