A former hedge fund manager has been charged with defrauding investors of at least $12.6 million in a federal indictment on Friday, nearly two years after the fund collapsed under the weight of failed real estate loans. Lloyd Barriger continued to promise investors an 8 percent return, even as the fund, Gaffken & Barriger, defaulted on a $20 million line of credit and held an increasingly delinquent portfolio, according to the indictment, which was unsealed on Friday.
In addition, the US Securities and Exchange Commission issued its own charges against Barriger, claiming he defrauded both investors in Gaffken & Barriger and in a second fund he managed, Campus Capital Corp. According to the SEC complaint, Barriger raised money from Campus to prop up Gaffken & Barriger without disclosing it to Campus investors. The case represents one of the few noteworthy criminal prosecutions to grow out of the housing crisis. The Justice Department has faced criticism for moving too slowly to bring cases against top executives at financial institutions.
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