The U.S. Attorney’s Office for the Southern District of New York said Monday that it had arrested Andrew W.W. Caspersen, a son of famed financier and philanthropist Finn M. W. Caspersen, for attempting to defraud two institutional investors out of $95 million by offering promissory notes tied to an illegitimate shell company named to imitate a legitimate private equity fund.
The Securities and Exchange Commission filed civil charges against Caspersen the same day.
Preet Bharara, the U.S. attorney for the Southern District of New York, said Monday that from at least July 2015 through March 2016, Caspersen, a partner in the Park Hill Group, an advisory firm that up until last fall had been a part of the Blackstone Group’s advisory business, fraudulently solicited investments in securities by “falsely representing that he had authority to conduct deals on behalf of his employer with another private equity fund, and that investors’ funds would be invested in a secured loan to an investment firm, when in fact no such security existed and no such investments were made, and which funds Caspersen converted to his own use without the authorization of his investors.”
As a result of the scheme, Caspersen, 39, converted to his own use approximately $24.6 million from a charitable foundation affiliated with a multinational hedge fund based in New York, and $400,000 from an employee of the hedge fund, Bharara said.
“Rather than invest his victims’ funds as promised, Caspersen used a portion of the $25 million to trade securities in his personal brokerage account, which funds he largely lost as a result of aggressive options trading.”
Shortly before his arrest, Casperesen fraudulently attempted to solicit an additional $20 million investment from the same charitable foundation and a $50 million investment from another multinational private equity firm headquartered in New York, Bharara states. He was unsuccessful.
According to the SEC complaint filed in federal district court in Manhattan, Caspersen, a New York City resident, solicited the investments by offering promissory notes issued by Irving Place III SPV LLC, a shell entity formed and controlled by Caspersen with no legitimate business operations, unlike the similarly named Irving Place Capital Partners III SPV, a legitimate private equity fund not associated with Caspersen.
Andrew Calamari, director of the SEC’s New York Regional Office, said in announcing the alleged fraud charges that “Caspersen engaged in a brazen fraud by raising money under false pretenses and simply stealing the funds. This action amply demonstrates that even sophisticated institutional investors are not immune to financial scams.”
The SEC complaint alleges that Caspersen obtained the $25 million investment in November 2015 from an institutional investor by falsely representing that the investment would be secured by approximately $900 million of assets of Irving Place Capital Partners III SPV.
The SEC is seeking a permanent injunction, return of allegedly ill-gotten gains with interest, and monetary penalties.
The SEC’s investigation is continuing.
Finn M. W. Caspersen, Andrew’s father, was the founder of Knickerbocker Management. He donated tens of millions of dollars to schools and was an influential donor to Republican political candidates. He killed himself in 2009.
— Check out Advisor Misconduct: How Widespread? on ThinkAdvisor.