Hedge Fund Manager Ordered to Pay $81 Million in Ponzi Case

  • Marlon Quan appealed jury verdict tied to Petters fraud
  • Judge ordered Quan to disgorge profit after Minneapolis trial

A Connecticut hedge fund manager must surrender almost $81 million in profit from aiding Thomas Petters’s $3.5 billion Ponzi scheme, an appeals court ruled.

Marlon Quan concealed evidence of the Petters fraud, partly by engaging in $187 million in “round-trip” transactions, the U.S. Securities and Exchange Commission said in its lawsuit against him. Quan’s Greenwich, Connecticut-based Acorn Capital Group LLC, ACG II LLC and Stewardship Investment Advisors LLC were co-defendants.

Petters is serving a 50-year prison term. He was convicted in 2009 of bilking hundreds of investors who thought they were financing short-term transactions involving consumer electronics that Petters said were destined for big-box retailers.

Quan appealed a 2014 disgorgement order and an earlier verdict by a federal jury in Minneapolis, which found him liable for securities fraud. A St. Louis-based appeals court on Tuesday said the judge had the authority to make him pay, turning aside Quan’s claim.

“Quan utterly fails to dissuade us from affirming the disgorgement award the district court ordered,” according to the three-judge panel.

Chris Casamassima, a lawyer for Quan, didn’t immediately respond to phone and e-mail messages seeking comment on the ruling.

Jurors determined that Quan breached five of the seven securities laws the SEC accused him of violating in its 2011 lawsuit. The jury cleared him of similar conduct on another count and an aiding-and-abetting claim.

The appellate panel also rejected arguments by Quan that the jury instructions weren’t accurate and that the jury’s findings were inconsistent.

The appellate case is U.S. Securities and Exchange Commission v. Quan, 14-3707, U.S. Court of Appeals for the Eighth Circuit. The lower-court case is U.S. Securities and Exchange Commission v. Quan, 11-cv-00723, U.S. District Court, District of Minnesota (Minneapolis).

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