This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

High-Flying Falcone Clipped By Fraud Charges

The SEC is also pushing for "market manipulation" charges against the billionaire hedge fund guru in relation to bond investments in the debt of MAXX Holdings group.

The SEC alleges that from 2006 through early 2008, Harbinger allegedly orchestrated an illegal 'short squeeze' on the supply of the bond issue - after hearing of banks buying short positions in the security -- with the intent of forcing settlement with short sellers at inflated prices.

In that strategy, the SEC says Falcone raised Harbingers stake in MAXX bonds to approximately 13% more than their available supply. Having taken control of the supply of the MAAX bonds, Falcone then demanded that short sellers settle their outstanding MAAX shorts at unfair and manipulative prices.

Harbinger has been the focus of federal scrutiny for over a year after it was reported that Falcone used a $113 million loan in 2009 to pay personal taxes. The SEC investigation focused on whether the loan -- which was eventually revealed -- was disclosed in a timely fashion, according to the Wall Street Journal. According to its suit on Wednesday, the SEC claims that Harbinger misrepresented its financial situation to investors and its legal advisors.

Without admitting or denying guilt, Harbinger also settled an order that alleged the fund violated the Securities Exchange Act of 1934 in purchasing shares of an initial public offering during its restricted period and selling those securities short, in violation of Rule 105. As a result of the settlement, Harbinger will pay a disgorgement of $857,950, interest of $91,838, and a civil monetary fine $428,975.

Harbinger and Falcone have faced massive losses over the past year as a bet on high-speed wireless went south after 4G wireless provider LightSquared declared bankruptcy and wiped out most of Harbinger's near-$3 billion investment.

"Any allegations by the SEC of impropriety by Mr. Falcone or Harbinger are supported neither by the facts or the law," said Matthew Dontzin, counsel for Falcone, in a Tuesday statement related to the SEC's pending civil charges. "Should a lawsuit be brought it will be contested vigorously."

-- Written by Antoine Gara and Christopher Westfall in New York.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.74 0.00%
FB $117.58 0.00%
GOOG $693.01 0.00%
TSLA $240.76 0.00%
YHOO $36.60 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs