The U.S. Securities and Exchange Commission (SEC) has accused the co-owners of a now-defunct Ridgefield hedge fund with lying to investors as the fund was struggling to stay afloat during the financial crisis.
New Stream Capital L.L.C. fund managers David Bryson and Bart Gutekunst, former CFO Richard Pereira and former head of investor relations Tara Bryson were charged by the SEC with fraud for allegedly misleading investors about the firm’s fiscal condition and secretly revising the fund’s capital structure just prior to its collapse.
According to the Feb. 26 SEC complaint, David Bryson and Gutekunst revised the fund’s capital structure in March 2008 to placate Gottex Fund Management – New Stream’s largest client with nearly $300 million invested – which had threatened to withdraw its funds.
The SEC alleges that New Stream would have struggled to attract and retain investors had the firm revealed that it restructured its fund structure to favor Gottex. The complaint states that as of September 2008, the fund, which managed $750 million in primarily illiquid investments, was facing $545 million in redemption requests from clients. New Stream ultimately filed for bankruptcy in March 2011 after several failed attempts at restructuring, according to the SEC.
The alleged scheme is said to have allowed David Bryson and Gutekunst to raise nearly $50 million in addition to “lucrative fees,” according to the SEC complaint.
Tara Bryson has agreed to settle the SEC charges, and the U.S. Attorney for the District of Connecticut has filed parallel criminal charges against David Bryson, Gutekunst and Pereira.
