FORMER HEDGE FUND MANAGER ARTHUR G. NADEL ARRESTED TODAY ON FRAUD CHARGES

U.S. Department of Justice Press Release via the FBI website:

United States Attorney

Southern District of New York

FOR IMMEDIATE RELEASE CONTACT: U.S. ATTORNEY’S OFFICE

JANUARY 27, 2009
Contact :
Robert Nardoza
United States Attorney’s Office
(718) 254-6323

FORMER HEDGE FUND MANAGER ARTHUR G. NADEL ARRESTED TODAY ON FRAUD CHARGES

LEV L. DASSIN, the Acting United States Attorney for the Southern District of New York, and JOSEPH M. DEMAREST, JR., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that ARTHUR G. NADEL, 76, of Sarasota, Florida, was arrested this morning on securities and wire fraud charges. As alleged in the two-count Complaint unsealed today in Manhattan federal court:

NADEL was the investment adviser for six funds. Three
of the funds (referred to in the Complaint as the “Group I funds”) — Viking IRA Fund LLC, Viking Fund LLC, and Valhalla Investment Partners LP — had been established by Valhalla Management and Viking Management, general partnerships that had been created by two individuals identified in the Complaint as Partner-1 and Partner-2. The other three funds (referred to in the Complaint as the “Group II funds”) — Victory IRA Fund Ltd., Victory Fund Ltd., and Scoop Real Estate LP — were established by Scoop Management and Scoop Capital LLC, general partnerships that NADEL himself had created. NADEL, who was based in Sarasota, Florida, traded for all of these funds through a broker in New York City.

Documents provided by the SEC indicate that over one hundred investors, located throughout the United States, invested in these various funds. As late as September 2008, documents sent to one investor falsely indicated that the Valhalla and Viking funds (“Group I”) had a total of $210 million in assets, divided approximately equally among them. Records recently obtained from the fund custodians show that, as of the end of 2005, over $60 million had been invested in the Group II funds.

However, those records also show that, at as of end 2008, there was in fact less than $125,000 in net liquidating value in all of the funds combined. Partner-2 has also advised that one $900,000 wire transfer made from the Valhalla Investment Partners LP fund in August 2008, based on a wire request with the signature of “Art Nadel,” was not authorized. Partner-1 has advised that NADEL had also, for years, resisted hiring an independent certified public accountant to audit the funds, and only agreed to do so after the arrest of BERNARD MADOFF. On January 13, 2009, Partner-2 sent NADEL a letter relating to hiring an independent certified public accountant for this purpose.

The next day relatives of NADEL reported to Sarasota police that NADEL had left a note reflecting that he was no longer going to be around. In addition, what appears to be a handwritten letter from NADEL to his wife was discovered in a shredding machine at his offices in Sarasota; that letter states in part that “[t]he avenues to money for you will likely be blocked soon.”

NADEL was arrested following his surrender to the FBI
this morning and is expected to be presented before a United States Magistrate Judge in Tampa federal court at 3 p.m. today.

NADEL is charged with one count of securities fraud and one count of wire fraud. The securities fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense.

The wire fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense.

Mr. DASSIN praised the work of the FBI in the investigation of this case, and thanked the United States Securities and Exchange Commission for its assistance. He added that the investigation is continuing.

Assistant United States Attorneys REED M. BRODSKY,
MARIA E. DOUVAS, and JEFFREY ALBERTS are in charge of the prosecution.

The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

SEC Charges Missing Trader for Defrauding Investors at Sarasota-Based Hedge Funds

1/20/2009 SEC Press Release:

Washington, D.C., Jan. 21, 2009 — The Securities and Exchange Commission today charged Arthur Nadel of Sarasota, Fla., with fraud in connection with six hedge funds for which he acted as the principal investment advisor. According to the SEC’s complaint, Nadel provided false and misleading information for dissemination to investors about the funds’ historical returns and falsely overstated the value of investments in the funds by approximately $300 million.

Additional Materials

According to the SEC’s complaint, the funds appear to have total assets of less than $1 million. The complaint also alleges that Nadel recently transferred at least $1.25 million from two of the funds to secret bank accounts that he controlled. Nadel reportedly has been missing since Jan. 14, 2009. The SEC also alleges that two entities with which Nadel was associated, Scoop Capital LLC and Scoop Management, Inc., provided investment advice to all of the funds and also engaged in fraud as a result of Nadel’s actions. The SEC has obtained an emergency court order freezing defendants’ assets and appointing a receiver.

David Nelson, Director of the SEC’s Miami Regional Office, said, “Investors should be able to rely on the truthfulness of an account statement and offering materials. Mr. Nadel’s alleged actions deceived investors, and we are seeking to hold him accountable for that misconduct.”

The six hedge funds and two other investment management companies are charged as relief defendants in the SEC’s complaint. The SEC alleges that Nadel provided false and misleading information to the relief defendants for dissemination to investors through account statements and through offering memoranda. For example:

Offering materials for three of the funds represented that they had approximately $342 million in assets as of Nov. 30, 2008. In fact, those funds had a total of less than $1 million in assets at that time.
Offering materials for at least several of the funds represented monthly returns of around 11 to 12 percent between January and November 2008. In fact, at least three of the funds had negative returns during that time and another fund had lower than reported returns.
One investor in one fund received an account statement for November 2008 indicating that her investment was valued at almost $420,000. In fact, the entire fund had less than $100,000 at that time.

The SEC filed its emergency action in the U.S. District Court for the Middle District of Florida alleging that the defendants violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and seeking, among other things, injunctions, disgorgement plus prejudgment interest, and civil money penalties.

United States District Judge Richard A. Lazzara granted all of the emergency relief requested by the SEC, including a temporary restraining order, asset freeze, and other relief against Nadel.

Without admitting or denying the allegations of the SEC’s complaint, Scoop Capital and Scoop Management consented to the entry of, among other things, preliminary injunctions, asset freezes, and the appointment of a receiver. The SEC is seeking disgorgement plus prejudgment interest against each of the relief defendants (advisers Valhalla Management, Inc. and Viking Management, LLC and hedge funds Scoop Real Estate, L.P., Valhalla Investment Partners, L.P., Victory IRA Fund, Ltd., Victory Fund, Ltd., Viking IRA Fund, LLC, and Viking Fund, LLC). Without admitting or denying the allegations of the complaint, they consented to asset freezes and the appointment of a receiver.

The SEC recognizes cooperation that has been provided by Scoop Capital and Scoop Management, and by the relief defendants. The SEC’s investigation is continuing.

# # #

For more information, contact:

David Nelson
Regional Director, SEC’s Miami Regional Office
(305) 982-6332

Glenn S. Gordon
Associate Regional Director, SEC’s Miami Regional Office
(305) 982-6360

Chedly Dumornay
Assistant Regional Director, SEC’s Miami Regional Office
(305) 982-6377

http://www.sec.gov/news/press/2009/2009-10.htm