Ex-Charlotte hedge fund manager pleads guilty to new charges
A former Charlotte hedge fund manager already in prison for an investment scheme that cost investors at least $8.9 million pleaded guilty July 1 to two new charges as part of a widening case involving a New York technology start-up.
Stephen E. Maiden, 43, faces up to 25 years in prison on the conspiracy to commit securities fraud and wire fraud charges, according to the U.S. Attorney’s Office in Manhattan. A federal judge in Charlotte last year sentenced Maiden to seven years in prison last year in a case that involved investors in his former hedge fund Maiden Capital.
In new developments disclosed this week, an investor who was once described as “the most powerful person in Hollywood you’ve never heard of,” was arrested and charged with participating in a conspiracy to defraud investors in Kit Digital Inc.
Omar Amanat, 43, who lives in New York and New Jersey, was arrested at 6 a.m. Wednesday, according to Nicholas Biase, a spokesman for the U.S. Attorney’s Office in Manhattan.
His arrest widens the criminal case against Kit Digital, a technology startup. The company’s former chief financial officer, Robin Smyth, pleaded guilty to fraud in March. Kaleil Isaza Tuzman, the company’s former chief executive officer, is in custody in Colombia and is fighting extradition to the U.S.
Maiden and Rima Jameel, an attorney based in the United Arab Emirates, were also charged in connection with the case, according to court papers made public Wednesday. Maiden pleaded guilty on July 1, while Jameel, 49, remains a fugitive, Biase said.
Prosecutors claim that Amanat, Tuzman, Maiden and an unnamed individual used an investment vehicle controlled by Tuzman to purchase Kit Digital shares. Amanat introduced Maiden to Tuzman in the summer of 2008 as a possible investor, according to the charges.
Working with Tuzman, Maiden allegedly used his fund to inflate the share price and trading volume of Kit Digital, prosecutors said. Using money from Tuzman and Kit Digital, they invested $2 million from December 2008 to September 2011, in effect using the company’s money to invest in itself, prosecutors said. Maiden was rewarded with loans and investments from Kit Digital, according to the charges against him.
Maiden Capital told investors their money, which had already been lost in Kit Digital, was still in the fund, according to prosecutors. Kit Digital filed for bankruptcy in 2013 and is now known as Piksel Inc.
Maiden was sentenced in February 2015 to seven years in prison for defrauding 39 investors out of $8.9 million, as part of a Ponzi scheme. The government has said Maiden is cooperating in the investigation.
Jameel is charged with conspiracy, securities fraud and money laundering. Prosecutors allege he set up a UAE-based escrow fund that Kit Digital used to fund fraudulent transactions, using its own money to pay off uncollectible bills owed to the company.
In 2011, the Wrap, an online publication that covers the entertainment business, described Amanat, an entertainment investor, as “the most powerful person in Hollywood you’ve never heard of.”
More than two dozen individuals, mostly in the Carolinas, filed suit in 2014 against Maiden and his former hedge fund administrator, SS&C Technologies. That case is currently moving forward in N.C. Business Court.
The investor suit seeks compensatory and punitive damages from Maiden and SS&C Technologies. The suit alleges SS&C papered over “accounting infirmities” at the fund and made a choice to stop “documenting and verifying” the fund’s assets. Staff writer Rick Rothacker contributed.
This story was originally published July 14, 2016 at 11:49 AM with the headline "Ex-Charlotte hedge fund manager pleads guilty to new charges."