Ex-Visium hedge fund manager to face trial on U.S. fraud charges

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By Nate Raymond | NEW YORK

NEW YORK A former portfolio manager at Visium
Asset Management LP is scheduled to face trial on U.S. charges
stemming from an investigation that led to the New York-based
hedge fund’s closure last year.

Jury selection is set to begin on Wednesday in Manhattan
federal court in the case of Stefan Lumiere, Visium founder
Jacob Gottlieb’s former brother-in-law, who is accused of
engaging in a scheme to falsely inflate the value of securities
in a bond fund.

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

According to court papers, Lumiere, 46, served as the
portfolio manager for a fund called Visium Credit Opportunities
Fund from May 2009 to April 2013.

From 2011 to 2013, prosecutors said, Lumiere and others,
including portfolio manager Christopher Plaford, schemed to
defraud investors by mismarking the value of securities held by
the fund, which invested in debt issued by healthcare companies.

Prosecutors said the practices 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, when they were not.

Lumiere, who was arrested in June, has pleaded not guilty to
conspiracy, securities fraud and wire fraud charges.

His lawyers are expected at trial to challenge prosecutors’
claims that the securities’ prices were mismarked and
unreasonable, according to court papers.

At trial, prosecutors are likely to call as a cooperating
witnesses Plaford, who pleaded guilty in June in connection with
the mismarking scheme and the separate insider trading matter.

Prosecutors are also expected to call a former Visium trader
who has been cooperating with authorities since 2013 and
covertly recorded Lumiere.

The cooperating witness has been helping authorities in
hopes of recovering a monetary reward, according to court
papers. While not named in court papers, the witness is Jason
Thorell, a person familiar with the matter said.

Lumiere’s lawyers say the details of the potential reward
indicates he is seeking a recovery from the U.S. Securities and
Exchange Commission, which can award whistleblowers up to 30
percent of any money it collects in a case.

The SEC declined comment. Thorell did not respond to a
request for comment.

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



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