By Debbie Gregory.
A former executive of Connecticut-based hedge fund New Stream Capital LLC will serve two years in prison after pleading guilty to federal conspiracy charges that he helped mislead clients to keep the firm’s largest investor.
David Bryson is one of three defendants who orchestrated a scheme to secretly keep an offshore fund open to prevent an investor from withdrawing funds. The others who pleaded guilty were Bart Gutekunst and Richard Pereira.
Bryson, a graduate of the U.S. Naval Academy, served aboard a Navy destroyer for three years and led searches of vessels suspected of smuggling drugs.
The three men were arrested in February 2013 and faced up to five years in prison. They were scheduled to go on trial in June, 2014 before pleading guilty. Prosecutors say the fund’s investors were defrauded out of more than $46 million and that Bryson collected more than $5 million in management fees and profit sharing.
Bryson has been described as a core member of his community and church, a dedicated family man, a hardworking and honest businessman and a proud Navy veteran.
In 2007, New Stream told foreign investors that a fund would be closing and they would have to move their investments into new funds in the Cayman Islands. At risk of losing their largest investor, the three defendants set in motion a scheme to secretly keep the fund open and give priority to certain investors, prosecutors said.
The U.S. Securities and Exchange Commission sued the three men in federal court in New Haven in 2013 over the firm’s collapse, saying they concocted a scheme to secretly revise the hedge fund’s structure to placate Gottex Fund Management Ltd., its largest investor with a stake of almost $300 million, by giving it and other preferred offshore investors priority over others in the event of a liquidation.
New Stream failed to inform investors who had transferred into the Cayman Islands fund that the existing fund was remaining open or that it was being given priority over the Cayman Islands fund, prosecutors said.
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Military Connection: Hedge Fund Leader, Navy Vet Sentenced: by Debbie Gregory