Things seemed to be going well for Silicon Valley hedge fund manager Albert Hu for quite some time. Beginning around 2001 his at least half a dozen hedge funds were supposedly performing well and successfully raising capital from investors. Things continued along smoothly for several years. Performance was supposedly consistently good and investors kept allocating his hedge funds capital. Investors with Mr. Hu’s funds thought they had nothing to worry about.
That was until 2009. In March of 2009 Mr. Hu, who reportedly claimed to have a PhD from MIT, was charged with fraud by the SEC. The SEC raised a number of concerning question about the operations of “Dr.” Hu’s hedge funds including Asquena Capital Management, AQC Asset Management and Fireside Capital Management. Among the SEC’s charges were that Hu:
1) Lied about his service providers – Hu claimed to investors that several “prominent international law firms” served as legal counsel to the funds.
2) Lied about auditor independence – Hu claimed that his funds were audited by “independent” auditors. The problem was that he paid for the auditors virtual office space. The SEC didn’t feel that this relationship was very independent at all.
3) Claimed people worked for his firm who didn’t – Hu claimed he had a Chief Financial Officer working for his firm. The problem was the person that he claimed worked for his firm didn’t actually work for him. Taking things up a notch, Hu went even as far as to forge this individuals signature on investor statements.
4) Used investor money for personal use or other unrelated business entities – Hu transferred money that investors had given him to invest in his hedge funds to personal business ventures including an unrelated venture in Taipei. The SEC alleged he made over 50 different such transfers of cash out of his hedge funds.
5) Lied about fund performance – Hu greatly exaggerated the performance of his hedge funds
6) Mysteriously relocated his hedge funds from California to Singapore – In 2005 Hu told investors that due to “burdensome tax regulations as well as ‘privacy concerns’ ” he was moving the hedge funds (and investors money) outside of the US.
7) Further lies about service provider relationships – After moving the funds to Singapore Hu then claimed he had a new “independent” auditor and fund administrator. This was also a lie.
In January 2013 Hu was convicted of cheating investors out of at least $6.5 million and was sentenced to 12 years in prison.