Ex-Millennium Global fund manager loses U.S. fraud appeal

Reuters News
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Posted: Nov 18, 2015 11:39 AM

By Nate Raymond

NEW YORK (Reuters) - A U.S. appeals court on Wednesday rejected a bid by a former London-based portfolio manager to reverse his conviction and four-year prison sentence for inflating his hedge fund's assets by manipulating the value of Nigerian debt.

The 2nd U.S. Circuit Court of Appeals in New York upheld the conviction of Michael Balboa, the former portfolio manager, who a jury in 2013 found guilty of charges including securities fraud.

The three-judge panel said evidence presented at trial was sufficient to establish that Balboa, 46, engaged in a conspiracy with two financial brokers to defraud his hedge fund's investors.

Neither a lawyer for Balboa nor representatives for Manhattan U.S. Attorney Preet Bharara responded immediately to requests for comment.

The case centered on Millennium Global Emerging Credit Fund, which invested in emerging markets corporate and sovereign debt. The fund once reported $844 million in assets, according to the U.S. Securities and Exchange Commission.

Prosecutors said Balboa, who ran the emerging credit fund from December 2006 to October 2008, inflated the value of illiquid warrants tied to Nigerian debt, in order to increase the apparent performance of the fund and boost his compensation.

As part of the scheme, which began in January 2008, Balboa instructed two co-conspirators to provide inflated values for the warrants to an independent valuation agent used by Millennium, prosecutors said.

While the warrants in 2008 traded for no higher than $239, Balboa instructed his co-conspirators to give the agent values of $525 to $3,500, prosecutors said.

The inflated valuations resulted in the emerging credit fund's own value to be overstated by about $80 million as of August 2008, prosecutors said.

Balboa that year earned $8.14 million, $2.2 million derived directly from the scheme, prosecutors said.

The emerging credit fund shut down in October 2008, and Balboa was charged in 2011. Following his conviction, U.S. District Judge Paul Crotty sentenced Balboa in June 2014 to four years in prison.

The case is U.S. v. Balboa, 2nd U.S. Circuit Court of Appeals, No. 14-2394.

(Reporting by Nate Raymond in New York; Editing by Andrea Ricci)