A former Charlotte hedge fund manager pleaded guilty to securities fraud in federal court on Thursday and was released on a $50,000 unsecured bond until sentencing.
Stephen Maiden, 40, reached a plea agreement in February with the U.S. Attorney’s office for a scheme in which he allegedly hid investment losses from his victims that totaled at least $8.9 million.
U.S. Magistrate Judge David Keesler called the alleged losses “shocking” before doubling the prosecutor’s bond recommendation and requiring Maiden to turn in his passport.
“I don’t want him leaving the country,” Keesler said.
Maiden faces a maximum sentence of 20 years in prison and up to a $250,000 fine. The plea agreement requires Maiden to pay restitution to victims. Property involved in the violations is subject to forfeiture.
During the hearing, Maiden, dressed in a dark suit and tie, quietly answered questions from the judge and formally entered his guilty plea. No sentencing has been set.
Maiden’s attorney, Richard Glaser Jr., declined to comment after the hearing, as did Assistant U.S. Attorney Mark Odulio.
The fund’s collapse is the latest tale of an investment firm that ran into trouble during the recession. In this case, the hedge fund manager was known in Charlotte financial circles and owned a home in Charlotte’s affluent Myers Park neighborhood before selling it in December.
Maiden launched the Maiden Capital Opportunity Fund in 2006 with investments from individuals in Charlotte and elsewhere, according to court documents. Hedge funds are loosely regulated investments for the wealthy.
In promoting the fund, Maiden touted degrees from Duke University and the University of Virginia and past experience as an investment banker at Chase Securities and as an investment analyst at a now-defunct Charlotte hedge fund called Mangan & McColl Partners, according to the documents.
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, the documents allege.
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 which he invested, the documents say. But by July 2012, Maiden Capital was insolvent.
Maiden used personal money 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.
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