Florida Fund Manager Denies Fraud Allegations

Florida money manager Arthur Nadel, who disappeared for two weeks in January when the six hedge funds he managed went bust, has formally denied allegations by the Securities and Exchange Commission that he engaged in a massive fraud.

In a seven-page, handwritten note filed last week with the court from his jail cell in Manhattan, Nadel calls the allegations "vague, indefinite and misleading."

The 76-year-old Nadel, a disbarred attorney, is representing himself in the case, since the court refused to un-freeze assets he would have used to pay for an attorney. While authorities have alleged that investors lost hundreds of millions of dollars in Nadel's funds, Nadel claims that "all investor withdrawals and redemptions prior to January 14, 2009 were profitable."

Arthur Nadel
Arthur Nadel

January 14 was the day the funds collapsed in a wave of redemptions following revelations of the Bernard Madoff Ponzi scheme. Nadel also defends the millions of dollars in fees he collected as "properly earned."

The SEC claims Nadel overstated the assets in the hedge funds by approximately $300 million, collecting millions in fees based on the total assets he claimed he was managing. And the agency says Nadel diverted millions more to secret bank accounts and to his other businesses.

Nadel also faces criminal fraud charges, and it is still unclear who will represent him in that case. He is being held on $5 million bond at the Metropolitan Correctional Center in New York—the same facility as Bernard Madoff—on a two-count criminal complaint. Prosecutors have until April 29 to secure an indictment against him.