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NEW YORK (October 24, 2018) - Former fund manager Gad Grieve was shanghaied when an investor in his fund went rogue and supplied fabricated and false information to the Securities Exchange Commission (SEC) about Grieve, in 2008. The rogue investor who is London based, with affiliates in France and Luxembourg, tried to pressurize Grieve to violate a lock-up clause in the fund’s agreement. Lock-up clauses permit fund managers to freeze redemptions in choppy markets, when liquidity becomes challenging, as in 2008 when Lehman Bank collapsed. It is understood that the investor sought preferential treatment after Grieve had invoked his fund’s lockup clause. The conspiracy was sparked by the investor’s need for Grieve to expedite the redemption of his allocation, which is believed to have run into millions of dollars.

The rogue investor’s elaborate plan utilized the services of multiple companies including a hedge fund online research firm, which investigates the background of fund managers to feed fabricated reports to the SEC. Sources indicate that the research company which acted as the investor’s proxy, brands itself as a firm that warns investors about fund blowups, long before they occur. One report showed that the research company used a self proclaimed “Wall of Shame” to advertise its success at identifying managers who have perpetrated fraud.

“The only problem with the “Wall of Shame”, said one New York trader. “Is that its historical.” The posts are made after the traders have been indicted and not all the managers have been found guilty of fraud, let alone any other violation.

The SEC, concerned about re-establishing its credibility after the Madoff scandal, welcomed information that would incriminate traders or investment managers on Wall Street. The research company that executed the transfer of false information, received payment from two sides: the investment company who was initiating the hit contract and the SEC.

Smaller firms with $500 Million AUM or less, in many cases didn’t have the resources to fight a full blown legal battle with the SEC, which often could run into millions of dollars. The result was that they buckled and pushed for a quick settlement, even if they were innocent and had to admit guilt. It was an easy way for traders to eliminate the enemy. A spokesman from a banking firm on Wall Street said, “No one will say it out loud or admit it, but everyone knows, if you don’t like a fund manager just turn the regulators on him. It’s dog eats dog.”

In 2009 the SEC filed a civil action against Grieve and his firm, Finvest Asset Management. An independent report confirmed that the suit was never legally served on Grieve. The SEC chose not to litigate the matter with Finvest Asset Management LLC. Grieve exited the investment industry in 2009 however, a few years later the SEC later took out several ex-parte default judgements against the parties. Clearly, the SEC were misled. According to people close to him, Grieve has no plans to return to the investment industry and is pursuing other interests. He could not be reached for comment With the appointment of a new SEC chief, Chairman Jay Clayton, practitioners on Wall Street say that the SEC has become more discerning with the information it receives. Accordingly, the-under-the-radar Mafia style hit-operation 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 always welcome, but we will investigate it thoroughly.” 

Paul Henderson, a correspondent for ABC News Agency contributed to this article.

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