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SEC Bans Former Hedge Fund Manager for Inflating Asset Prices
Ex-Visium hedge fund manager Christopher Plaford also faced insider trading charges.
The Securities and Exchange Commission has barred former hedge fund manager Christopher Plaford after charges that he inflated asset prices under a fraudulent scheme carried out with a colleague at Visium Asset Management.
Plaford, who pleaded guilty to securities fraud in 2016, is permanently banned from the industry, according to an SEC order dated July 29. Complaints filed by the regulator that same year alleged Plaford and portfolio manager Stefan Lumiere marked up assets in a credit fund while working for New York-based Visium.
Last year the SEC said that Visium agreed to pay about $10 million to settle charges of asset mismarking and insider trading by its privately managed hedge funds and portfolio managers. The U.S. Department of Justice sentenced Lumiere to prison in 2017 and the SEC barred him from the securities industry the following year.
“For an 18-month period, Plaford and Lumiere allegedly used sham broker quotes to mismark as many as 28 securities per month, surreptitiously passing their desired prices along to brokers via Lumiere’s personal cell phone or a flash drive delivered by a courier,” the SEC said in a July 29 statement. “The fund consequently reported artificially inflated returns and monthly net asset values, and paid millions of dollars in inflated management and performance fees to its investment adviser.”
Visium, which specialized in healthcare-related investments, shut down following the charges. Plaford had received a portion of the inflated fees from its credit fund because of his position at the investment adviser, the SEC said.
[II Deep Dive: Visium Probe Shows Feds Still Have Hedgies in Their Sights]
The SEC had also alleged that Plaford bought and sold securities based on material, nonpublic information from the Centers for Medicare and Medicaid Services Fund and other private funds advised by the hedge fund firm, according to the July 29 order. He used CMS’s “internal deliberations and upcoming actions regarding certain insurance reimbursement rates,” as well as nonpublic information from the U.S. Food and Drug Administration, the regulator said in the order.
In February, Plaford was sentenced to “time served,” three years of supervised release, a $7,311 fine, and a criminal forfeiture of $6,611 that represented his proceeds from insider trading, according to the SEC statement.