Former Charlotte hedge fund manager sentenced to 7 years in prison

A federal judge on Wednesday sentenced a former Charlotte hedge fund manager to seven years in prison for securities fraud, citing the damage caused to nearly 40 victims.

Stephen Maiden, 41, reached a plea agreement in February 2013 with federal prosecutors for a scheme in which he allegedly hid from his investors losses that totaled at least $8.9 million.

U.S. District Judge Robert Conrad, who handed down the sentence, said Maiden violated the trust of the investors in his fund. Victims lost money, their ability to trust others and suffered marital disruptions and other problems, he said.

“Far beyond the economic loss, there are injuries to people that never can be made whole,” Conrad said.

Maiden’s case was similar to the “plethora” of Ponzi scheme cases that have come before his court in recent years, Conrad said, but with degrees from Duke University and the University of Virginia, Maiden was better educated and more skilled than other defendants. That made him “more dangerous,” he said.

Maiden, who was known in Charlotte financial circles and once owned a home in Charlotte’s affluent Myers Park neighborhood, faced between 10 and 12 1/2 years in prison under federal sentencing guidelines, Conrad said. Mark Odulio, of the U.S. Attorney’s Office, recommended Maiden receive 8 1/2 years, while Maiden’s attorney, Richard Glaser, asked for two.

Maiden was ordered to pay restitution, but Gary Mauney, an attorney representing some of the victims, said it’s unlikely he will be able to pay any money back. Victims submitted letters to the court but did not speak at the sentencing.

Conrad and prosecutors acknowledged Maiden has cooperated with an ongoing investigation, including meeting with authorities in New York. Odulio said the case is “making progress but has a significant way to go.”

Maiden, who now lives in Virginia, 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.

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 the fund was doing well and making money, the documents allege.

“In early 2009, Mr. Maiden reached a crossroads and made a decision to deceive rather than to disclose,” Conrad said.

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 said. 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.

At the sentencing, an emotional Maiden, supported by his wife and other family members, apologized for his actions. “I am so, so, so profoundly sorry to every investor for hurting them,” Maiden said.

Since he came under investigation, Maiden said he has become a “giver” rather than a “taker,” working for a University of Virginia prison outreach program and exploring his own personal spirituality. He said he runs a web site called spiritbath.com that posts inspirational videos.

In September, more than two dozen individual investors, mostly in the Carolinas, filed a civil suit against Maiden and the fund’s administrator.

The suit seeks compensatory and punitive damages from Maiden and SS&C Fund Services, part of a Connecticut-based financial services company.

“Seven years is a long time,” said Mauney, referring to Maiden’s sentence. “But the effect that this has had on my clients will last a lot longer than seven years.”

This story was originally published February 11, 2015 at 12:11 PM with the headline "Former Charlotte hedge fund manager sentenced to 7 years in prison."