Visium Fund Manager Enters Not Guilty Plea in Fraud Case

  • Stefan Lumiere denies mismarking porfolio securities
  • Case linked to wide-ranging U.S. insider-trading probe

A former Visium Asset Management LP portfolio manager pleaded not guilty to federal charges that he lied about the value of securities in his fund’s portfolio to boost the firm’s revenue -- and his own bonus.

Stefan Lumiere, 45, a portfolio manager for distressed credit at a Visium fund, appeared Monday before U.S. District Judge Jed Rakoff in New York. The charges are the latest to grow out of the government’s far-reaching investigation into the hedge fund firm that managed $8 billion at its peak.

“We’re ready to go forward and do what we need to do to get him exonerated,” his lawyer, Eric Creizman, told reporters outside court.

Lumiere, who left the firm in 2013, got traders at broker-dealers to quote favorable prices on illiquid securities that helped the fund overstate its net asset value by “tens of millions of dollars” each month, according to federal prosecutors.

The government’s investigation has led to allegations that fund managers traded pharmaceutical shares based on insider tips about drugs in the U.S. Food and Drug Administration’s approval pipeline, as well as charges that the fund was mismarking security values. A top Visium manager, Sanjay Valvani, committed suicide last month after he was indicted on insider-trading charges.

Lumiere and a colleague contacted the brokers and told them the prices they wanted to be quoted on certain securities, and the brokers would then send the quotes back by e-mail, according to an indictment.

Performance Figures

The higher valuations were used to calculate monthly performance figures that were reported to investors, allowed Visium to charge clients higher management rates on the fund and boosted Lumiere’s bonus payments, the government said.

The practices also allowed the firm to tell clients that it was investing in fairly liquid securities, when in fact they were highly illiquid, prosecutors said.

In another practice known as “painting the tape,” Lumiere and a colleague would also buy securities at inflated prices at the end of certain months, which also contributed to inflated asset values in the fund, prosecutors said.

The case is U.S. v. Lumiere, 1:16-cr-00483, U.S. District Court, Southern District of New York (Manhattan)

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