ICP Hedge Funds [Cayman] file for creditor protection in U.S.
By Patrick Fitzgerald, From Bankruptcy News Dow Jones & Company Ltd
A pair of Cayman Islands-based hedge funds run by a former Harvard quarterback accused of defrauding clients who invested in collateralized debt obligations is seeking bankruptcy protection in the U.S.
The liquidators winding down the offshore funds—ICP Strategic Credit Income Fund Ltd. and ICP Strategic Credit Income Master Fund Ltd.—put the companies into Chapter 15 protection Monday in U.S. Bankruptcy Court in New York.
The two so-called feeder funds were managed by ICP Asset Management LLC, a money-management firm founded by Thomas C. Priore.
In a bankruptcy court filing on Friday June 28 the two Grant Thorton accountants winding down the funds said they filed for Chapter 15 to help them locate and, potentially, claw back assets in the U.S. for the benefit of the funds’ creditors.
The liquidators are suing Mr. Priore and ICP in New York state court, claiming the CDO manager defrauded their clients of more than $35 million. They say ICP’s founder Thomas Priore, ICP’s founder and former Harvard University quarterback, has “obstructed” their efforts.
Steven Lester, a lawyer for Mr. Priore said his client vigorously denies the allegations. ICP has countersued for the Cayman funds for $2.7 million in unpaid management fees. Mr. Priore’s company managed more than $20 billion in financial assets at its height about four years ago.
Under Chapter 15 a company or court-appointed liquidator seeks a U.S. bankruptcy court’s reunited stunited stcognition of a foreign bankruptcy case as the main, or controlling, proceeding. The liquidator is charged with locating and protecting a company’s property for the protection of its creditors and shareholders.
A hearing on the liquidators’ bid for U.S. court recognition is slated for Aug. 1 before U.S. Bankruptcy Judge Robert Gerber in Manhattan.
The ICP hedge funds were created for foreign and tax-exempt investors to avoid U.S. tax laws. Investors pumped $245 million into the funds, which were invested in CDOs known as Triaxx. The Triaxx CDOs were loaded with $11 billion in mortgage-backed securities issued at the tail end of the housing boom.
When the value of its mortgage holdings tanked in 2008, Triaxx was on the hook for margin payments to its repo lender Barclays PLC.
The Cayman liquidators say Mr. Priore trIed to keep Triaxx afloat by funneling money from the hedge funds to cover the margin calls.
In 2010, Securities and Exchange Commission accused Mr. Priore and ICP of defrauding investors in similar Triaxx deals. Last year Mr. Priore settled, without admitting guilt, with the SEC for $23.6 million. He also agreed to a five-year ban from working as a broker, dealer, investment adviser, municipal securities dealer or transfer agent.
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Thomas Priore, ICP Management Founder, SUED By SEC For CDO Fraud
By Nathaniel Cahners Hindman. Huffington Post (First Posted: 06/21/10 02:58 PM ET Updated: 05/25/11 05:50 PM ET)
The Securities and Exchange Commission today filed civil fraud charges against ICP Asset Management and its founder, Thomas Priore, for fraudulently managing an $11 billion pool of mortgage-backed collateralized debt obligations (CDO) during the housing market bust in 2007.
According to the SEC’s complaint, New York-based ICP and Priore defrauded clients by overcharging them for securities purchases and structuring trades in ways that disadvantaged them, enabling ICP and its affiliates to reap “massive, risk-free, and undisclosed profits.” The scheme cost investors tens of millions of dollars, the AP reports.
In 2006, ICP began serving as a collateral manager for what was known as the Triaxx CDOs, an investment vehicle whose assets primarily consisted of mortgage-backed bonds. As the markets declined in 2007, ICP and Priore directed more than a billion dollars of trades by the Triaxx CDOs at what they knew were artificially inflated prices, the complaint alleges.
“The CDOs were complex but the lesson is simple,” said the director of the SEC’s New York Regional Office, George S. Canellos, in the agency’s press release. “Collateral managers bear the same responsibilities to their clients as every other investment adviser. When they violate their clients’ trust, we will hold them accountable.”
American International Group and Financial Guaranty Insurance Co. provided insurance on the CDOs, reports the WSJ, but ICP and Priore failed to gain the insurers’ required approval for many of the securities purchases.
The SEC suit comes at a time when the agency is trying to step up its financial fraud prevention. Earlier this month, the Washington Post noted that the agency is hiring Wall Street veterans and experts with specialized quantitative skills to better police complex financial systems.
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http://www.huffingtonpost.com/2010/06/21/sec-sues-icp-asset-manage_n_619511.html
ICP Asset Management’s Thomas Priore settles with the SEC
By Aaron Elstein From Crain’s New York Business (August 19, 2012 12:01 a.m.)
A quarterback sack? – ICP Asset Management’s Thomas Priore settles with the SEC, but pulled off real estate deals that would limit the amount of cash that can be collected.
One of Wall Street’s major players in last decade’s housing mania has waved the white flag in a battle with securities regulators. Thomas Priore, CEO of ICP Asset Management and a former Harvard quarterback, has agreed to a settlement with the Securities and Exchange Commission, which two years ago charged him with defrauding clients by improperly pocketing “tens of millions of dollars” in fees and undisclosed profits by inflating the value of mortgage-related bonds his firm had sold them.
The agreement’s existence was disclosed in a Manhattan federal court filing earlier this month. Its precise terms couldn’t be learned. An attorney for Mr. Priore, Nathan Kitchens, declined to comment, and the SEC, whose commissioners must still approve the agreement, also wouldn’t comment.
People like Mr. Priore were important middlemen during last decade’s housing bubble, when the name of the game for banks was to sell off mortgages as quickly as they wrote them. Mr. Priore’s role was CDO manager, which meant that he helped select the mortgages that investment banks pooled to create the complex bonds (known as collateralized debt obligations) and helped parcel them out to institutional buyers. By 2008, Mr. Priore’s firm managed $25 billion in assets, according to Bloomberg News, up from $5 billion two years earlier.
When the housing bubble popped, the SEC said, Mr. Priore’s firm “repeatedly” cheated customers by causing some to overpay for bonds acquired from other ICP clients. In one instance, ICP sold a client $22 million worth of mortgage bonds at a price of $75 each, even though earlier in the day it had bought the same bonds for another account at $63.50. The SEC also said ICP awarded itself “massive, risk-free, undisclosed profits” by directing brokers to cancel trades made weeks earlier and rewrite the orders so that Mr. Priore’s firm was the buyer.
A handful of Wall Streeters have been charged criminally with inflating the value of complex mortgage-related securities. Two Credit Suisse employees, for instance, pleaded guilty earlier this year to overstating the value of mortgage-backed securities on their books to hide losses. A spokeswoman at the federal prosecutor’s office in Manhattan wouldn’t comment on whether Mr. Priore is the subject of a criminal investigation.
In any case, 10 days after SEC staffers notified Mr. Priore in March 2010 that they intended to file fraud charges, he sold his Martha’s Vineyard, Mass., house for $1 to trusts controlled by himself, his spouse and a third person. At the same time, he sold his residence in Chappaqua, N.Y., to the trusts for $10. The SEC contends the transfers were done to limit the amount of money it could collect from Mr. Priore.
In an answer filed in court, Mr. Priore’s wife said the sales were made “pursuant to ongoing estate planning.”
Photo: Patrick McMullan
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http://www.crainsnewyork.com/article/20120819/FINANCE/308199979
