Two Men Charged with Fraud for Looting Hedge Funds
LAS VEGAS, Nev. – Two men have been charged with conspiracy and fraud for engaging in a scheme to misappropriate $34 million from two Florida-based hedge funds during 2008 to 2010, announced Daniel G. Bogden, United States Attorney for the District of Nevada.
Robert Buckhannon, 53, of Las Vegas, and Terry Rawstern, 66, of Aberdeen, S.D., are charged in a criminal indictment with one count of conspiracy to commit wire fraud and one count of wire fraud. Buckhannon, who was arrested by FBI agents yesterday in Henderson, Nev., pleaded not guilty this afternoon at an arraignment before U.S. Magistrate Judge George Foley, and was released on a personal recognizance bond pending trial. Rawstern’s arraignment is scheduled for tomorrow, Oct. 2 at 3:00 p.m. If convicted, the defendants face up to 30 years in prison on the conspiracy charge, up to 20 years in prison on the wire fraud charge, and fines of up to $1 million on each count.
“We have been working with our federal, state and local partners to investigate and prosecute persons who commit significant financial crimes,” said U.S. Attorney Bogden. “Often these cases take considerable time and resources to investigate and litigate, but the American people deserve to know that we are working diligently to catch the perpetrators.”
According to the indictment, from April 2008 through April 2010, Buckhannon and Rawstern and co-conspirators were managing members of two Bradenton, Florida-based hedge funds, Arcanum Equity Fund, LLC and Vestium Equity Fund, LLC. The defendants allegedly engaged in a fraudulent scheme to misappropriate $34 million they raised from investors by misrepresenting how they would use the investors’ funds and misrepresenting that there were safeguards over the investors’ money, such as an independent trustee and independent fund administrator. The defendants then looted and bankrupted the hedge funds by taking payments on false and fictitious profits and taking improper and undisclosed loans. The indictment states that as a result of the defendants’ conduct, investors lost approximately $13.1 million. In April 2010, the hedge funds voluntarily filed for Chapter 7 bankruptcy and are now under the control of court-appointed trustees.
The case is being investigated by the FBI, and prosecuted by Assistant U.S. Attorney Kathryn C. Newman.
This prosecution is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets and recover proceeds for victims of financial crimes. For more information about the task force visit: www.stopfraud.com.