Hedge Fund Shells Out in Shorting Probe

A New York hedge fund manager will pay $16 million to settle allegations arising out of a two-year-old investigation into manipulative trading in the market for private placements by small-cap companies.

The penalty agreed to by Jeffrey Thorp is the largest settlement assessed to date by the Securities and Exchange Commission in the investigation into trading abuses in the $18 billion-a-year market for PIPEs, or private investment in public equity.

The PIPEs investigation is focusing on allegations of abusive short-selling by hedge funds trying to take advantage of the usual decline in shares of companies that sell these deals. ...