Corporate fraud has impacted investors across the world. Some of the most infamous cases of business fraud are popular because they effect the masses. Many of these cases were small, however they involved sophisticated information. That sophisticated information was used to steal millions of dollars up from underneath intelligent investors. Business fraud was committed by the Lipper Company, by Ken Lipper and Edward Strafarci.

 

 

These two individuals committed securities fraud by lying about the worth of their companies equity. Specifically, Ken Lipper stated that his company was worth about five billion dollars, which was later found to be a lie. He admitted to committing corporate fraud by adding forty percent to the actual total worth of his company. He was forced to pay back investors all the money that was acquired fraudulently. 

 

 

Beacon Hill Asset Management company was guilty of corporate fraud in the same way by manipulating the numbers. The leaders in this company increased the actual worth of their company by fifty percent. The investors of the company experienced losses adding up to three hundred million dollars. John Barry, Thomas Daniels, John Irwin, and Mark Miszkiewicz were charged with business fraud, and charged about four and a half million dollars. This money had to be paid back to the investors of the company. In addition to restitution, these individuals were banned from acting in an administrative role within a large corporation. 

 

 

Tradewinds International was a company guilty of corporate fraud, along with administrator Charles Harris. Mr. Harris was accused of lying about how much money his corporation was worth as well. Tradewinds International was worth about one million dollars, he claimed that it was worth twenty times that amount. Aside from business fraud, he was accused of spending the money in his personal life as well. He later recorded a message confessing how he had lied to the investors, and then turned himself into the police.

 

 

Donald O'Neill of Orca Funds committed corporate fraud when he gambled away eight hundred thousand dollars worth of corporate assets. He lied to investors by claiming to invest the money in another country. Donald was later convicted of fraud through mail and wiring, and sentenced to prison time. 

 

 

A popular hedge fund, the Manhattan Investment fund, was home to one of the first massively reported hedge fund scandals. Michael Bergers committed corporate fraud against investors by manipulating investment reports. He did this in an effort to cover up losses within the company. He acquired about six hundred million dollars in assets in the year nineteen ninety nine.

 

 

However, the company began experiencing significant profit losses. The failure of Michael Bergers to report to his investors the losses that have occurred, couple with his fabrications, made him liable for business fraud. He pleaded guilty to the corporate fraud, however is still on the loose. 

 

 

All of these cases of business fraud are infamous for manipulating investment information. The individuals that committed the fraud were found guilty because investors were not allowed to make their own decision based off of public information. The company information was left private, or was publicized in a way that was reflective of a non existent group of assets. Due to these infamous cases, SEC regulations have increased within financial industries, in an effort to combat business fraud. 

Those hedge funds guilty of financial fraud are subjected to liability on a criminal level. Other losses include court fees, restitution, legal counsel fees, penalties, and initial losses acquired from the fraud itself. Monetary losses are only the first type of loss that individuals guilty of financial fraud experience.

 

 

The second type is reputation losses, that result from deceit and misconduct. Individuals that are accused of financial fraud often have to answer to the masses. Since a hedge fund usually operates using a large number of investors, the reputable losses can prove to be huge for the company and individuals involved. More than half of the market participants believe that financial fraud will occur due to hedge fund fraud. Hedge funds obtain about one and a half trillion dollars worth of assets and securities. 

 

 

Hedge fund regulations predict large losses for investors, since over four hundred of the more than eight thousand hedge funds are under investigation for fraud. However, since hedge funds are private investment agencies, it is much harder for hedge fund regulation to be enacted. Hedge funds that are guilty of fraud or insider trading, are liable under the Securities Exchange Act of 1934.

 

 

Hedge funds regulation requires that all funds that exceed one hundred million dollars, and are traded publicly, must be reported to the SEC. Hedge fund regulations require that all hedge funds report substantial amounts of investment information to their investors to avoid financial fraud. The Exchange Act is a hedge fund regulation that requires companies to report all public investments to the SEC. Many times the equity of a hedge fund officer totals more than twenty five percent. This can cause that one officer to lose a substantial amount of money if an investigation occurs. 

 

 

Although hedge fund regulation places restrictions on companies, they do not always succeed in interrupting fraud. Many times the regulations against financial fraud are in response to the fraud. Only recently have regulations increased to prevent losses. Hedge funds are usually untouched by regulation fees, and penalty charges.

 

 

Even though hedge funds have to follow laws and regulations, they are regulated liberally. Unlike mutual funds, and the open market, private trade can operate differently. The losses experienced due to the to financial fraud within hedge funds has pushed regulation increases. Protection is given to managers and investors of stock to create a lower profit laws. Since hedge funds control a large portion of the economic flow, regulation is vital in preventing a catastrophic downfall in the economy. 

 

 

 

Hedge funds are also investigated by the Federal Bureau of Investigation, which has tackled many different famous casesMore importantly, it depicts the need for more federal regulation. Hedge funds account for up to fifty percent of daily stock exchanges on the New York Stock Exchange. Hedge funds cover a significant amount of the economy. This makes it very dangerous for the economy to not regulate hedge funds. Automatically, hedge funds are carrying an investment risk of some sort. It is the job of the investor to research the company and weigh the risks against possible profits.Performing a due diligence and filing complaints are also ways to combat fraud.