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.

NIR Group Investors Scream Valuation Fraud after Report of 97% Loss on Investments

Investors in a troubled hedge fund founded by Corey Ribotsky were told by the funds’ liquidator last week their hopes of recovering any real money was slim. I reported on the 97 percent drop in valuation for Growth Capitalist today in a story that details how main street investors who gave their pension money to NIR Group’s AJW Funds are shaking their heads in utter disgust. Investor frustration stems from the notion that the SEC has gathered a ton of new evidence to support their claims of asset valuation fraud in a new amended complaint against the hedge fund manager yet the Eastern District of New York DOJ hasn’t charged Ribotsky with any criminal wrong doing yet.

Ribotsky even came to investors with his dick in his hand this March trying to claim he’d been burned by the market and lost millions also via the fees he says he invested back into the fund. This effort is spelled out in a seven page letter sent to NIR Group investors that you can read below. Keep in mind Ribotsky wrote this letter after a court appointed liquidator kicked him out as fund manager in January and then the liquidator showed investors a cash flow report that reflected a completely different picture than Ribotsky had told them for years.

There is a ton of new details in the story on NIR at Growth Capitalist so go ahead and register for free to read it.

Editors Note: Growth Capitalist is a new trade publication founded by one of my former Dealflow Media editors, Brett Goetschius, who has a ton of experience reporting on finance for the institutional and main street investors. If you’re looking for news that helps you with the kind of investment research that hedge funds pay big banks millions of fees for Growth Capitalist could be a good starting point.

2012-03 Ribotsky Letter to NIR Group Investors