SEC Says Jailed Fund Manager Still Hiding Funds in Swiss Banks

  • Kapur this week marks year anniversary in jail for contempt
  • Judge sees progress but orders fund manager to remain in jail

A former hedge fund manager who has spent the past year in a Brooklyn jail crying poor has stashed millions of dollars siphoned from his former clients in in foreign bank accounts, regulators contend.

Chetan Kapur, who claims he can’t pay the $10 million he owes the U.S. Securities and Exchange Commission in a civil fraud case, was aided in part by Mossack Fonseca, the law firm at the heart of the Panama Papers scandal, according to newly obtained records from Swiss authorities.

Kapur, the former managing director of New York-based ThinkStrategy Capital Management, was jailed July 7, 2015, after refusing to pay judgments obtained by the SEC and several former investors. He claims he’s broke.

Following a hearing Thursday, U.S. District Judge Paul Engelmayer sent Kapur back to the lockup on the Brooklyn waterfront, saying releasing him would remove the incentives to satisfy the judgments. The judge said he’s encouraged that Kapur is starting to show signs that he’s willing to cooperate.

"We need to unwind the fraudulent transfer of these funds," Engelmayer said. "If Mr. Kapur is interested in purging the contempt, he ought to move aggressively. I’m sorry that it’s taken one year for the message to get to Mr. Kapur."

Pursue Leads

In the wake of the Panama tax-cheating leaks which cited Kapur as having established at least one account at Bank Vontobel AG, Englemayer in April directed lawyers to pursue any leads helping locate any assets. 

The SEC said Tuesday that newly-disclosed documents provided by Swiss authorities indicate Kapur has money in offshore bank accounts, including a Societe Generale SA account with more than $820,000, a Bank J. Safra Sarisin AG account which contains about $1.3 million.

A third account at Bank Vontobel AG is in the name of a foundation which was established with the help of Mossack Fonseca lawyers and holds about $2.2 million, according to a July 5 letter regulators sent a federal judge in New York.

"Kapur was the beneficiary of these accounts when when they were funded and the funds appear to have come directly from Think Strategy Capital Management," Michael Roessner, a lawyer with the SEC said. 

Regulators say Kapur should remain jailed until he complies with the court’s order to pay.

Frozen Funds

While a prosecutor in Geneva has ordered most of these funds frozen since late 2012, the SEC says it’s determined that in 2014, there were seven withdrawals from a Vontobel account in Kapur’s family trust, totaling about $90,000. 

The SEC says it believes Kapur set up the foundation at Vontobel using Think Strategy client funds. Swiss records show that almost $48,000 which Kapur said his brother Kabir "lent" him in June 2014, came from the foundation at Vontobel in 2014.

"These documents further expose Kapur’s asset protection scheme," Roessner said. "Specifically, they show Kapur controlled the foundation when it was funded with, it appears, his clients’ funds. He then made his brother Kabir Kapur, the beneficiary shortly before this court entered the judgment against him. But, he continued to benefit from this money."

No Luck

Kapur’s lawyer, Eric Creizman, said he has approached family members in an attempt to communicate with Kabur’s brother but hasn’t had any luck -- an issue the defense attorney said may exist regardless of whether his client is in prison.

"They haven’t spoken in quite a while," Creizman said at Thursday’s hearing. "They haven’t communicated in quite a while."

The case is: SEC v. Kapur, 11-cv-8094, U.S. District Court, Southern District of New York (Manhattan).

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