Due Dilligence Problems at JP Morgan Securities: Pension Report Snafu

Due diligence appears to be lacking at JP Morgan Securities. I reported today for Growth Capitalist the mega-bank’s clearing business was using valuation reports from a notorious hedgie manager who has been sued for fraud by regulators and outed from his fund. The inaccurate reports then went to pension investors.

JPM Clearing manages the asset valuation reports Hedge Funds have to file for investors who used IRA pension dollars to join a hedge fund. There are all kinds of special tax treatments this type of investor gets so banks like JP Morgan often act as custodians between investors and the hedge fund managers. Except in this case JP Morgan forgot to do a simple google search to learn Long Island hedgie Corey Ribotsky, of NIR Group, hasn’t had the rights to send any info on the value of the investments in his AJW funds since January.

NIR Group was a large investor in the PIPE space and at its height boasted around $800 million of fund assets. But investors had a rude awakening last month when I reported the court appointed liquidator, PwC, was sending out reports showing the funds had lost 97% of their value. So it’s kind of troubling to see Ribotsky out there trying to get JP Morgan to spin a story for him, by having them deliver reports with inaccurate valuations, during the same week the Liquidator is trying to tell these poor investors they are only getting pennies back.

There is a bunch of great details about other tax related errors (possible manipulations to avoid the IRS knowing taxes should be collected) the hedge fund manager did with JPM Clearing; so go read the story at Growth Capitalist while registration is still free.


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