A Charlotte hedge fund manager has agreed to plead guilty to securities
fraud for hiding investment losses that cost his victims at least $8.9 million,
according to court documents.
Stephen Ewing Maiden agreed to plead guilty to one count of securities fraud, which carries a maximum sentence of 20 years in prison and up to a $250,000 fine, according to an agreement signed in February by Assistant U.S. Attorney Mark Odulio. A final plea hearing has not been scheduled.
Maiden's attorney, Richard Glaser Jr., declined to comment. A spokeswoman for the U.S. Attorney's Office for the Western District of North Carolina also declined to comment.
According to court records, Maiden hid losses in his hedge fund, called the Maiden Capital Opportunity Fund, by routinely sending "bogus account statements" to investors and the fund's administrator.
The fund, founded in 2006, had lost a substantial amount of investor funds by February 2009, but the statements claimed favorable monthly returns, according to the documents.
The case is the latest tale of investment fraud that has emerged from the downturn in financial markets during the recession.
According to documents, Maiden gathered investments from individuals from Charlotte and elsewhere for his hedge fund, a type of loosely regulated investment pool for affluent investors. In promoting the fund, Maiden touted his educational and professional experience, according to the documents.
Maiden listed a bachelor's degree from Duke University and an MBA from the University of Virginia and past experience as an investment banker at Chase Securities and as an investment analyst at Mangan & McColl Partners, a now-defunct Charlotte hedge fund.
By February 2009, Maiden had lost a substantial amount of investor funds on large investments in a small company and in an international arbitrage investment fund, according to the documents. To keep investors from pulling their money, he began sending out false statements showing that the fund was doing well and making money, according to the documents.
In April 2009, for example, he sent a statement that reported a monthly net return of 4.9 percent and a 30-month net return of 47 percent, according to the documents. In reality, the returns were faked and Maiden had already lost a majority of the fund's assets on the bad investments.
Maiden continued to operate the fund and take in new investments and tried to recover the lost money by making additional trades and reaching settlement agreements "with individuals and entities with whom he invested," according to the documents.
But by July 2012, Maiden Capital was insolvent.
Maiden used personal funds as well as funds from other investors to cover investor withdrawals, according to the documents, falsely telling investors that the payments came from successful operations.
Maiden and his attorneys signed the plea agreement in October 2012. In December, he sold his home in Myers Park for $630,000, about $110,000 less than he paid for it in 2006, according to property records.
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