In recent weeks, a former Charlotte hedge fund manager has been a star witness for federal prosecutors at a Manhattan trial, but his appearance has also highlighted his own role in sprawling fraud allegations as well as alleged drug use.
In 2015, a federal judge in Charlotte sentenced Stephen Maiden to seven years in prison for a securities fraud that cost 40 victims nearly $9 million after his Maiden Capital hedge fund unraveled. A year later, he pleaded guilty to additional charges in New York and is now testifying against former business associates who are accused of manipulating shares in a former technology company called Kit Digital.
According to Bloomberg News coverage of the trial, the attorney for defendant Omar Amanat, a former technology industry star, called Maiden a “cocaine-addicted fraudster and admitted liar” in his opening statement. An attorney for the other defendant, former Kit CEO Kaleil Isaza Tuzman, said Maiden is testifying to get out of prison.
“The government’s star witness took his clients’ money and blamed his gambles on Omar,” Amanat’s attorney Randall Jackson said, according to Bloomberg.
Maiden launched the his hedge fund in 2006 with investments from individuals in Charlotte and elsewhere, often touting his degrees from Duke University and the University of Virginia to land clients, according to court documents. By February 2009, he had lost a substantial amount of investor funds and to keep investors from pulling their money began sending out false statements, the documents state.
Already in prison on those charges, Maiden pleaded guilty in 2016 to the new charges in New York related to Kit Digital. Prosecutors claim that Amanat, Tuzman and Maiden used an investment vehicle controlled by Tuzman to purchase Kit Digital shares to inflate the share price and trading volume of Kit Digital.
Maiden, 44, is scheduled to be sentenced on Dec. 1 but before that is testifying in the trial of Amanat and Tuzman.
In testimony this month, Maiden told jurors that he was captivated by the business skills and Hollywood connections of Amanat, who was pitching Kit Digital shares in 2008, according to a Bloomberg account of the trial. Maiden was looking for attractive investments during the developing financial crisis, but the decision to invest in Kit ultimately led to the collapse of Maiden Capital, a business that Maiden said had fulfilled a “lifelong dream,” according to the story.
Defense attorneys during the trial have worked to question Maiden’s testimony, including bringing up allegations about Maiden’s drug use. Jackson said text messages showed Maiden routinely talking about cocaine use with his friends, according to Bloomberg. Maiden told jurors he didn’t use cocaine as much as the texts suggested and that the drug references were jokes.
Defense attorneys also raised questions about whether a friend helped Maiden evade federal wiretaps by passing along helpful advice from his sister, who worked in the Justice Department, according to Bloomberg.
Rick Glaser, Maiden’s attorney, declined to comment. The trial in New York is ongoing.
Meanwhile, Maiden remains a defendant in a civil suit in North Carolina Business Court that accuses Maiden Capital’s third-party fund administrator, SS&C Technologies, of giving his investors assurance about the legitimacy of the assets in the fund. 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.
In that case, the plaintiffs in September asked a judge to bring sanctions against SS&C Technologies for failing to produce documents. That motion is still pending, according to the court docket.