Card Shark's Son Busts

A short-sale is a market bet that a stock will decline in price.

Securities regulators, in a civil complaint filed in federal court as part of the settlement, charged Thorp with carrying out an illegal short-selling scheme involving 23 separate PIPE deals from 2000 to 2002. Some of the alleged unlawful trading by Thorp occurred in PIPE deals by AVI BioPharma(AVII - Cramer's Take - Stockpickr), MGI Pharma(MOGN - Cramer's Take - Stockpickr) and TiVo(TIVO - Cramer's Take - Stockpickr).

Thorp did not respond to an email request seeking a comment on the SEC settlement. His attorney did not return a telephone call. Scott Friestad, associate director in the SEC's enforcement division, whose group worked on the Thorp case, declined to comment about the hedge fund manager's father.

The elder Thorp, who lives in California, did not return a telephone call. A person answering the phone at his office said, "He isn't talking about that matter. He never talks about his family.''

It's not clear what the status of Jeffrey Thorp's Langley Capital hedge fund is these days.

A few years ago, Langley was one of the more active investors in PIPEs, a type of financing that often is a last-ditch attempt by a small company to continue operating. But it no longer ranks among the leaders when it comes to PIPE investors.

Presumably, the SEC investigation may have led Thorp to pull back on PIPE deals. Then again, the SEC investigation isn't the only legal problem Thorp has had to deal with in recent years.

Thorp and his Langley hedge fund were implicated, but not charged, in the federal prosecution of notorious short-seller Anthony Elgindy. Last year Elgindy and former FBI agent Jeffrey Royer were convicted on charges of conspiring to drive down the stock prices of companies they were shorting by leaking negative news about those companies on the Internet.