Ritchie Capital Management, founder and CEO A.R. Thane Ritchie, and the firms flagship hedge fund will pay a total of $40 million to settle a joint investigation by the SEC and New York state Attorney General Andrew Cuomo into charges that the companies engaged in an illegal late-trading scheme, according to an SEC news release.
The SEC claimed that Ritchie Capital and the Ritchie Multi-Strategy Global Trading hedge fund, overseen by Mr. Ritchie, used falsified pre-4 p.m. ET time stamps to place thousands of post-4 p.m. trades in mutual fund shares from January 2001 through September 2003. The post-4 p.m. trading resulted in a profit of about $30 million to the Ritchie Multi-Strategy fund, the SEC said. Mr. Ritchie approved the use of late trading by Ritchie Capitals mutual fund group and oversaw its performance.
Under the settlement order, Ritchie Multi-Strategy and Ritchie Capital will pay a total disgorgement of $30 million, with interest of $7.4 million, the SEC news release said. Ritchie Capital and Mr. Ritchie will pay another $2.5 million in civil penalties, while Warren DeMaio, a Ritchie Capital employee who supervised mutual fund trading, will pay $250,000. The SEC said the payments will be distributed to the affected mutual funds.
We are pleased to put this matter behind us, and we will continue our other efforts to maximize value for all of our investors, said Mr. Ritchie in a news release, adding that he, the firm and the fund do not admit or deny the claims of the SEC or Mr. Cuomo.