New Canaan, Conn. hedge fund manager Greg Imbruce has been sued for investor fraud by a group that includes a former Bridgewater Associates partner and New Canaan millionaire William Mahoney. I reported the sordid details of Imbruce’s alleged scheme at Growth Capitalist today.
The suit, filed in Stamford Superior Court, became public in July after Imbruce reneged on an earlier private settlement with his investors. But this isn’t the first time Imbruce has been in trouble for his work. In January 2011 FINRA fined him for violating Rule 105 of Regulation M while he worked at Bernard L. Madoff Securities. Rule 105 prohibits the sale of securities during the restricted period and then the purchase of the same securities in the secondary public offering – FINRA says Imbruce did this illegal move in shares of $ATPG in November 2007 that netted Madoff Securities a profit it should not have earned.
Imbruce, who grew up in Westport, Conn. and graduated from Lehigh College in 1993 is an active member of the Stamford Yacht Club. His sailing awards have earned him accolades from Connecticut Governor Malloy but unbeknownst to his tony friends at the yacht club he’s been accused of running a complicated financial scheme to front run his own investors and deceive board members of an oil exploration company that was gearing up to go public.
Imbruce came across my radar this December when I saw a letter of interest his fund, ASYM Energy Partners, had sent bankrupt New Stream Capital–a fund I’d reported was being investigated by the SEC and the FBI for asset valuation fraud and more. Imbruce was interested in buying some oil and gas leases New Stream had overvalued on their books. According to one of Imbruce’s top employees he was going to give a kickback to New Stream to buy the assets for less cash than the inflated asking price of $70 million but New Stream would still book the deal at the inflated price. The transaction never went through and I found no evidence Imbruce had ever paid the kickback. Still he went on my list as a possible hedgie fraudster. I finally spoke with Imbruce in April when I called his Stamford office to see he if wanted to comment on a letter I’d been leaked, which accused him of all kinds of bad things and demanded his resignation from the board of Starboard Resources. His only comment was, “You can’t print that it’s private.” I had to explain actually as a journalist I can and will. After that he’s refused to return calls and emails for comment but people invested in his hedge fund or staff that have worked for him kept me apprised of his questionable actions.
If you are looking for a road map of how one man’s ego brazenly led him to screw over his own investors go read the story at finance trade publication Growth Capitalist Investor. What’s interesting here is Imbruce isn’t suffering financially yet for his alleged fraud because as investors can sue him for unjust enrichment, and kick him out of fund management, he still gets to keep the ‘carried interest’ in his fund and cash out if one of the funds’ assets goes public or gets sold for a profit. Jonathon Whitcomb, the Stamford securities attorney hired by investors, is trying to make sure that doesn’t happen but he’s got to do some fancy legal maneuvering if he’s going catch Greg Imbruce.
So far Imbruce has been able to skate clear of the Securities and Exchange Commission because the amount of money he managed at his hedge fund, ASYM, was below the watchdog’s threshold. Imbruce is the kind of operator who apparently is a master at cheating the
market/investors, suffers only a menial slap on the wrist, and then moves onto his next financial endeavor. I understand he is now trying to raise money for an oil well plugging and abandonment company.
The Connecticut Department of Banking could take a look at him for violations though because he never filed as an exempt investment advisor in the State. If investors can use some of the new Dodd-Frank financial regulations they’ll have a chance of forcing Imbruce to give up his carried interest, return it to the funds limited partners, and halt more money coming his way. You see according to investors he always told them he had his own money invested in the fund. Yet they later learned the ‘skin in the game’ Imbruce touted to entice more investments was non-existent.
Another problem Imbruce could face is a questionable transfer of assets at the beginning of the year. New Canaan town records show after Imbruce learned frustrated investors could try to attach his personal assets he moved his new $2.2 million home at 92 Turtleback Road into his wife’s name, Alana Imbruce, for only one dollar. The transfer was registered on February 9th 2012. An attorney familiar with the suit against Imbruce said a court could consider this fraudulent conveyance of assets and his wife could also be named as a defendant.
Of course Imbruce investors like New Canaan’s William Mahoney, Brad Higgins, and an Irish family fund, SOSventures, could have done a FINRA broker check before they forked over millions to this hedgie with a troubled past. Hopefully he doesn’t use his boat, Joyride, to sail away before the court awards them some restitution.
Editors Note: For you investors who follow tech companies and think the name Imbruce sounds familiar – Greg’s brother is Doug Imbruce a Silicon Valley star and the founder of Qwiki. A company TechCrunch Disrupt first highlighted at an investor event in 2010.
UPDATE: William P. Mahoney died in his New Canaan home on April 30th from cancer at the age of 55. He was a great friend to many in the investment world and a wonderful family man. He will always be remembered for his generous spirit and love of life.