When Charlotte-based investment firm Maiden Capital unraveled in 2013 amid securities fraud allegations, more than 40 victims were left with losses of nearly $9 million.
The hedge fund’s manager, Stephen Maiden, pleaded guilty and was sentenced in 2015 to seven years in federal prison. But an effort to recoup damages for investors through a lawsuit against the outside fund administrator has moved slowly in North Carolina Business Court.
In the latest twist in the case, the plaintiffs are asking a judge to bring sanctions against the fund administrator, SS&C Technologies, for failing to produce documents related to its policies and procedures. A motion by the plaintiffs last month says the Connecticut-based company has ignored a court order to turn over the documents.
“SS&C has flagrantly disobeyed the court’s order and should be sanctioned harshly for its conduct,” the lawyer for the plaintiffs, Gary Mauney of Lewis & Roberts, says in a court filing.
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Mauney declined to comment, as did a spokeswoman for SS&C. A hearing is scheduled for Sept. 22.
The complex case shows the difficult road that investors can face in recovering their money in investment fraud schemes. Since the lawsuit was filed against SS&C in 2014, more than three-dozen witnesses have been deposed, and plaintiffs have gone through tens of thousands of pages of documents, according to the filing. Two of the victims have died since the suit was filed, the filing added.
Maiden, now 44, launched the Maiden Capital Opportunity Fund in 2006 with investments from individuals in Charlotte and elsewhere, according to court documents. By February 2009, he 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 the fund was doing well and making money, the documents allege.
SS&C, a publicly traded company with a market value of nearly $8 billion, handled accounting and other administrative services for Maiden Capital. In December, the company expanded by buying Wells Fargo’s Global Fund Services business, which administers more than $42 billion in assets.
The lawsuit against SS&C, which also named Maiden as a defendant, accuses the company of giving investors assurance about the legitimacy of the assets in the fund and the accuracy of its financials. SS&C papered over “accounting infirmities” at the fund and made a choice to stop “documenting and verifying” the fund’s assets, the complaint states.
Meanwhile, since being sentenced in Charlotte, Maiden has pleaded guilty to new charges as part of a case involving a New York technology startup in which Maiden Capital invested. His sentencing in that case is set for Dec. 1, according to the court docket.