Ex-Visium fund manager convicted of fraud by Manhattan jury

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By Nate Raymond | NEW YORK

NEW YORK A former portfolio manager at Visium
Asset Management LP was convicted of fraud on Thursday,
following a trial that stemmed from a federal investigation that
led to the New York-based hedge fund’s closure last year.

Stefan Lumiere, whose sister had married Visium founder
Jacob Gottlieb, was found guilty by a federal jury in Manhattan
on securities fraud, wire fraud and conspiracy charges. The jury
needed less than two hours to reach a verdict.

Prosecutors said Lumiere, 46, and others deceived investors
through a mismarking conspiracy while overseeing the Visium
Credit Opportunities Fund, which in 2012 reported peak net
assets of $471.5 million. Visium closed the fund in April 2013,
court papers show.

Eric Creizman, a lawyer for Lumiere, told reporters that his
client plans to appeal.

The trial followed a federal probe of Visium that prompted
the $8 billion firm’s wind-down and charges against three
others, including Sanjay Valvani, a portfolio manager who
committed suicide in June after being accused of insider
trading.

According to prosecutors, Lumiere helped rig the process of
the Visium fund’s distressed debt holdings by, among other
things, obtaining sham quotes from brokers, who gave them the
inflated values they wanted, prosecutors said.

This allegedly caused the fund’s net asset value to be
overstated by tens of millions of dollars each month, and
deceived investors into believing the bonds were relatively
liquid.

In his closing argument earlier in the day, Creizman
maintained that Lumiere had no incentive to inflate the fund’s
value, and challenged prosecutors’ claim that Lumiere had been
motivated by greed after having been denied a bonus.

Creizman called his client the “low man on the totem pole”
at Visium, where his boss thought he did a poor job and where
Gottlieb was in the midst of divorcing Lumiere’s sister.

“Stefan Lumiere had no motive to commit this crime,” he
said.

But Assistant U.S. Attorney Joshua Naftalis countered that
Lumiere, wanting to keep his job, was seeking to inflate the
value of the bond fund’s securities holdings after his positions
sustained losses and investors began pulling out.

“He needed a way to keep the score himself,” he said. “So he
corrupted the valuation process… Lumiere put garbage into the
process, and garbage got spit out right back to investors.”

The case is U.S. v. Lumiere, U.S. District Court, Southern
District of New York, No. 16-cr-00483.



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