Federal regulators are seeking to punish a Colorado financial adviser burned in the Ponzi schemes of convicted swindlers Tom Petters and Bernard Madoff.
Neal Greenberg, head of Agile Group in Boulder, Colo., fraudulently marketed risky hedge funds as highly diversified and suitable for his clients, who were generally older people seeking low-risk, protected investments, according to charges the Securities and Exchange Commission (SEC) issued Tuesday. Those funds were then invested into the feeder funds for Petters' and Madoff's operations.
The allegations are part of a 12-page order instituting an administrative proceeding against Greenberg, who is accused of fraud and breaching his duty to his clients. A date for a trial before an administrative judge hasn't been set.
"Greenberg's unsuitable recommendations and misrepresentations deceived his advisory clients into believing their investments were safe with him," Donald Hoerl, director of the SEC's Denver office, said in a statement issued Tuesday.
Three of Agile's hedge funds -- the Agile Safety Fund, the Agile Safety Variable Fund and the Agile Safety Fund International -- suffered losses from heavy investments in feeder funds for the Ponzi scheme run by Petters, the Minnesota businessman sentenced in April to 50 years in prison for orchestrating a more than $3 billion fraud, according to the SEC's charges. The feeder funds were Lancelot Investors Fund and Lancelot Investors Fund II, and Palm Beach Finance Partners and Palm Beach Finance Partners II.
The Agile funds also suffered losses from investments it made into Rye Select Broad Market Fund and Rye Select Broad Market Prime Fund, which invested in Bernie Madoff's epic swindle.
The SEC order against Greenberg is the latest legal action emanating from the enormously complex unraveling of the Ponzi schemes of Madoff and Petters, as both men sit behind bars in federal prison. The SEC itself has come under fire for not doing enough to protect Madoff investors before the fraud became apparent.
The three Agile funds had about $174 million in investor capital from about 100 investors, according to the SEC. About half the investor capital was invested in the Petters feeder funds, and about 14 percent was invested in Rye Select.
Agile Group suspended redemptions in its funds in Sept, 2008 and the funds remain frozen.
Both Palm Beach Finance Partners in West Palm Beach, Fla., and Lancelot Investment Management, a hedge fund in Northbrook, Ill. have filed for bankruptcy. Gregory Bell, Lancelot's founder and owner, pleaded guilty to wire fraud in aiding Petters' operation and is scheduled to be sentenced on Sept. 30.
Steven Feder, Neal Greenberg's lawyer in Denver, could not be reached Tuesday for comment. Last fall, after a group of Agile clients sued it for destroying their retirements, Agile issued a statement to the Denver Post saying that it considers itself a victim of the Madoff and Petters frauds.
Jennifer Bjorhus • 612-673-4683
