How to Recover Loss in a Hedge Fund Fraud
Hedge funds are investment vehicles that pose great risk to investors. Regulation surrounding the asset class is less stringent compared with other types of investment funds and white collar crimes may go undetected for a while. Losses incurred in hedge funds as a result of fraud may never be recouped. Recovering losses is still possible, however. A judge will likely appoint a trustee to a fraud case in an attempt to liquidate assets and repay investors. Litigation may be necessary to recover a loss.
Other People Are Reading
Instructions
-
Get Organized
-
1
Gather any investment documents provided by the fraudulent hedge fund. Print any banking or financial transactions relating to deposits and withdrawal activity tied to the fund.
-
2
Recover any monthly or quarterly letters sent to investors by the hedge fund manager. These letters often cite investment performance and reasons surrounding any significant gains or losses.
-
-
3
Prepare remarks explaining why you believed the hedge fund was able to generate the types of profits that it delivered. A court-appointed trustee may argue that investors should have been able to recognize red flags surrounding consistently high investment returns.
Research and File
-
4
Review any public court documents relating to the hedge fund fraud case you fell victim to. Read financial publications to keep up with the status of a liquidation process, which is the sale of any items held by the hedge fund for cash.
-
5
File a complaint. The place in which you file a complaint will depend on the types of financial securities that the fraudulent hedge fund traded. Agencies to consider include the Federal Bureau of Investigation, the U.S. Securities and Exchange Commission, the National Association of Securities Dealers and the Commodity Futures Trading Commission.
-
6
Contact any court appointed trustee whom may have been appointed by a judge if that representative has not contacted you already. A trustee may sue the hedge fund and fight on your behalf so that you do not need to file litigation.
Legal Action
-
7
Retain an attorney. If money being recovered by a trustee is not satisfactory, you may need to file a lawsuit.
-
8
Sue the hedge fund manager. It is rare that a judge blocks litigation against a hedge fund, but if it happens -- as was the case with victims in the Thomas Petters hedge fund fraud -- appeal those decisions.
-
9
Determine whether you have exposure to a hedge fund fraud through a fund of funds. Hedge fund of funds invest in multiple hedge funds on behalf of investors. The fund of funds manager may have some responsibility in the recovery of assets.
-
1
Tips & Warnings
Check court records to see whether the hedge fund you are considered has been involved with any prior fraud.
If a hedge fund manager boasts of returns that seem too good to be true, there could be reason to suspect fraud.
