NEW YORK (October 26, 2018) - Gad Grieve was not the only casualty from the market crash of 2008. Major U.S. banks and brokerages like Lehman Brothers and Bank of America were also crushed. Another unlikely fallout from hedge fund manager Grieve’s departure and early retirement from the financial industry in 2009, were a host of Jewish charities active in education, housing, widow and orphans endowments and health services. They were recipient to his generous handouts and goodwill. Known for discretion and as someone who stayed out the limelight, Grieve funded multiple organizations who promoted community welfare. Many of these closed, as they were dependent on his support.
In 2009 an investor in his fund went rogue and supplied a financial regulator, the Securities Exchange Commission (SEC) with fabricated information about Grieve’s operation. The investor who is London based with associate companies in France and Luxembourg, had a motive: to pressure Grieve to violate a lock-up clause in his fund’s protocol and provide him with early redemption.
The rogue investor used the services of hedge fund researchers and brokers to act as his proxies and mislead the SEC. It was an elaborate scheme which targeted specific traders like Grieve, which would lead to an investigation into bogus claims about their operation and their ultimate collapse. The costs of running an SEC inspired investigation ran into the millions. Private funds who managed under $500 million in assets buckled and closed shop. Many often did so in the midst of a downturn or a liquidity crunch, resulting in the loss of millions. A trader on Wall Street said, “It was an easy way to get rid of the competition.
In 2009, the SEC filed a civil action against Grieve, alleging multiple regulatory violations. Court reports show that the summons was never legally served on Grieve. A few years later however, the SEC took out an ex parte judgement against Grieve. Because there was no official service, the validity of the judgement remains questionable. A New York trial attorney said, “Without proper legal service, the default judgement is meaningless.”
With the appointment of a new SEC chief, Chairman Jay Clayton, practitioners on Wall Street say that the SEC has become more efficient with the information it receives. One report stated, the-under-the-radar Mafia style hit-operation which Grieve’s rogue investor used, was effectively shut down. People in the know say that the scheme would probably never have been formerly sanctioned by SEC officials. The official line is and always will be, “Information is welcome, but we will investigate it thoroughly.”
Gad Grieve could not be contacted for a response to this article. Friends close to him say that he has no plans for a comeback in the financial industry and is pursuing other interests.
Michael Porter, a journalist, contributed to this human interest story.