ThinkStrategy Capital Management LLC’s Chetan Kapur, who initially was accused of deceiving investors about returns in his hedge funds, avoided prison when he was sentenced to time served for failure to preserve books and records of an investment.
Kapur, 38, who is from India, was sentenced today by U.S. District Judge John F. Keenan in federal court in Manhattan to the 12 1/2 months he already spent in custody. Kapur was charged in July 2012 with securities fraud, investor adviser fraud and wire fraud in connection with losses at his funds from 2002 to 2010.
The former hedge fund manager contended that he lost money along with other investors and tried to salvage their holdings. He pleaded guilty last month to the one count. Prosecutors dropped the other charges.
“The dispute over whether the investors lost money as a result of the defendant’s actions is not something for me to resolve,” Keenan said today.
In November 2011, the U.S. Securities and Exchange Commission alleged that Kapur misled investors about his funds’ track records and invested with fraudulent funds including Arthur Nadel’s Valhalla and Victory funds and Samuel Israel’s Bayou Superfund. The SEC, which said ThinkStrategy had $520 million in assets at its peak in 2008, settled its case against Kapur that same month.
Nadel, who pleaded guilty in 2010 to defrauding investors of $168 million, died while serving a 14-year prison term. Israel, Bayou’s co-founder, is serving a 22-year prison term after admitting he hid hundreds of millions of dollars in losses.
Kapur, who was dressed in a black suit in court today, has been free on bail since last month, said his attorney, Daniel Arshack.
In a statement to the judge, Kapur said he is “personally and professionally very upset about the losses we experienced” and that he lost much of his own savings in the funds.
“ThinkStrategy and I did not abandon investors, which we were legally entitled to do,” Kapur said. “Investors benefitted at the expense of ThinkStrategy and me.”
Arshack told the judge that the case was “somewhat disconcerting,” because the government had brought charges against Kapur while including him as a victim, identified in court papers as “Victim No. 1,” when it charged Nadel.
In a phone interview after the hearing, Arshack said the government found its evidence couldn’t support the previous charges. He called the shift in the case “remarkable.”
Julie Bolcer, a spokeswoman for Manhattan U.S. Attorney Preet Bharara, declined to comment on the case.
The criminal case is U.S. v. Kapur, 1:12-cr-00535, U.S. District Court, Southern District of New York (Manhattan).