Alberto Micalizzi, the manager of Dynamic Decisions Capital Management, has been hit with an FSA fine of £3m for purportedly buying fake bonds to conceal losses accrued following the financial turbulence of 2008.
The fund is said to have used the bonds, which claimed to grant the owner rights to $10bn worth of diesel in Russia’s Ural mountains, to persuade new investors to join. The deal is said to have been worth nearly £320m. Having consequently failed to sell these dubious assets, the company was bankrupt by the spring of 2009, with just $10m left on its balance sheets.
The FSA announced its decision before the tribunal hearing, which is scheduled for the early months of 2013. The fund lost around 85% of its value between the start of October and the end of December in 2008, and Micalizzi’s actions have landed him with a record FSA fine and a lifetime suspension from the City.
The FSA were quoted as saying that Micalizzi’s conduct “fell woefully short of the standards that investors should expect and behaviour like his has no place in the financial services industry.”
The collapse of the fund has been seen by some as a welcome reminder that Hedge Fund investment is not without its risks. This may prove timely, given the moral hazard said to be in further development after Spain was the recipient of yet another Eurozone bailout on Monday.
This FSA fine is likely to do little to appease those who view some of Wall Street’s many and varied participants with substantial misgivings. However, it seems unlikely that this will be the last such case that will come across our news sources as the financial crisis continues in the Eurozone, and investment managers are tempted to cover their losses illegally. Hundreds are currently under investigation by the FSA.