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A Massachusetts Institute of Technology professor and his son will pay $4.8 million to settle charges that their hedge fund solicited funds with a fabricated track record.
Gabriel Bitran and his son, Marco, who, beginning in 2005, raised more than $500 million for their Boston-based GMB Capital Management, did not admit or deny wrongdoing, but also agreed to be barred from working in the securities industry.
“The Bitrans solicited investors by touting an impressive track record and a unique investment strategy,” David Bergers, head of the Boston office of the Securities and Exchange Commission, told Bloomberg in a statement. “They lied about both.”
"The government alleges," Boston Business Journal adds, that GMB raised funds "by telling investors they'd executed real trades to great profit when in reality they were basing their boasts on simulated trades."
To market their fund, the Bitrans created performance records dating from 1998 that showed annualized returns of as much as 16.2 percent with no down years, the SEC said.
According to Bloomberg, the SEC alleges that certain GMB hedge funds were then just investing in other funds — including Bernard Madoff's Ponzi scheme — rather than the firm's marketed investment strategy.
Gabriel Bitran is a professor of operations management at MIT Sloan School of Management, according to the school's site.
In a statement to BBJ, the firm said the Bitrans "had great confidence in GMB's quantitative models" and added that the Bitrans "are pleased to have reached a settlement with the SEC."
This program aired on April 20, 2012. The audio for this program is not available.
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