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Hedge Fund Founder To Pay $291 Million In Fraud Case

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The Associated Press

Published: August 20, 2008

NEW YORK - A federal court ordered the former president and founder of a hedge fund to pay nearly $300 million for defrauding clients.
Federal prosecutors in November indicted Paul Eustace, president and founder of Philadelphia Alternative Asset Management Co., on two criminal counts of commodities fraud.

The government said Eustace stole $200 million from clients from 2001 to 2005. The government accused Eustace, of Ontario, Canada, of creating false account statements, hiking management fees based on false profits and transferring clients' money to himself.

On Tuesday, the U.S. Commodity Futures Trading Commission said Eustace was ordered to pay $279 million in restitution and a $12 million civil penalty.

The U.S. District Court for the Eastern District of Pennsylvania also banned Eustace from trading indefinitely.

Philadelphia Alternative, which traded in commodities futures and options, collapsed in 2005. But the hedge fund was ordered to pay $8.8 million in fines and may have to pay $276 million if Eustace does not.
Futures and options broker MF Global Ltd. agreed in December to pay more than $77 million to settle federal charges that it failed to watch over Eustace.

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