Alberto Micalizzi, whose hedge fund racked up hundreds of millions of dollars losses in the credit crisis, has been fined 3 million pounds ($4.7 million) by Britain's financial watchdog, its largest fine for an individual in a non-market abuse case.
The Italian chief executive of London-based Dynamic Decisions Capital Management was not fit and proper to perform any role in regulated financial services, the Financial Services Authority said on Tuesday.
Micalizzi was fined him for failing to ensure his business was run soundly and prudently, and was also banned from performing any role in regulated financial services.
In the FSA's view, Micalizzi lied to investors to try and conceal “catastrophic losses” of more than $390 million, around 85 percent of the value in the DDCM master fund, in 2008.
A Reuters investigation into Micalizzi's fund, DD Growth Premium, revealed in August that its main investment - $500 million of highly illiquid bonds - had been issued by a company in a trailer-park suburb of Phoenix, whose head was on the run from U.S. authorities.
Reuters also found the bonds he bought were backed by a global network of shell companies that included a Spain-based charity, the International Charitable Christian Fund.
The FSA said it had also cancelled DDCM's permission to conduct regulated financial business and that Micalizzi tried to frustrate its investigation by repeatedly providing false and misleading information.
“Alberto 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,” said Tracey McDermott, the FSA's acting director of enforcement and financial crime.
Micalizzi and DDCM have referred the case to the Upper Tribunal, where they will have a chance to appeal against the ban and fine, the FSA said.
Micalizzi is also under investigation in Italy where, last year, police raided two properties and launched a fraud investigation.
ARTIFICIAL GAINS
Micalizzi, a researcher at Milan's Bocconi University and an options pricing specialist, misled investors about the true position of his fund, the FSA said.
The regulator believes he entered into a number of contracts for the purchase and resale of a fictitious bond used to create artificial gains for his fund.
The bond contracts were sold to the fund at a deep discount to face value, but Micalizzi is judged to have revalued the bonds at approximately face value when reporting to investors, booking purported profit of over $400 million in late 2008 to counterbalance the fund's losses, the FSA said.
In one example, after Micalizzi provided false and misleading information to conceal the true value of the fund, a new investor put $41.8 million into it in December 2008.
Micalizzi's fund, which had attracted investors such as RMF, part of Man Group, and a subsidiary of the Ontario Teachers' Pension Plan Board, and whose directors included Michael Nobel, great-grandnephew of the founder of the Nobel Prize, was put into liquidation in spring 2009.
The fund's liquidator estimated the fund's assets on liquidation were worth around $10 million. Investors have not yet received anything from the liquidator, the FSA said. - Reuters