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Two hedge fund managers from Massachusetts agreed to plead guilty to conspiring to mislead investors into investing more than $500 million in their fraudulent hedge fund business.
Gabriel Bitran, a former professor and associate dean of MIT Sloan School of Management, and his son Marco Bitran, a Harvard Business School graduate and money manager, pleaded guilty to charges of conspiracy to commit securities fraud, wire fraud and obstruction of justice in connection with their hedge fund companies.
From 2005 through 2011, they attracted investors by claiming to invest using a "complex mathematical trading model" developed by Gabriel Bitran during his time at MIT. They raised more than $500 million but in fact, the money was invested in other hedge funds including Madoff's firm according to U.S. Attorney Carmen M. Ortiz.
When the financial crisis peaked in 2008, their investors suffered a loss of more than $140 million. The father and son withdrew about $12 million and charged them a total of $16 million in management fees. When U.S. Securities and Exchange Commission (SEC) began probing the Madoff Ponzi scheme, they made false statements to proof their claims of trading performance to the examiners.
In July 2009, Gabriel Bitran sent an e-mail to his son acknowledging that "we have mislead a lot of people with a range of statements that were incorrect simply to increase our income". Marco wrote "We are certainly sharing equally in this dad...Lots of our problems were caused by my good intentions but very poor actions when it came to true honesty." In 2012, the pair agreed to pay the SEC $4.8 million.
The charges were announced with a plea deal in August 2014 by the prosecutors. Under the plea agreements, they could face up to five years in prison as well as three years of supervised release, and $10 million in forfeiture. U.S. District Judge Mark Wolf deferred his decision to whether he will accept the plea until the date of sentencing on March 27 2015.