Former Ridgefield Hedge Fund Partner Sentenced for Role in Scheme to Deceive Investors

A former managing partner and principal of a Ridgefield-based hedge fund was sentenced for engaging in a scheme to deceive investors.

According to a press release from the United States Attorney’s office, David Bryson, 46 was sentenced to 33 months in prison followed by three years of supervised release.

According to court documents and statements made in court, in November 2007, New Stream Capital, LLC (“New Stream”) launched new feeder funds, one based in the United States (“U.S. Fund”) and a series of funds based in the Cayman Islands (“Cayman Fund”). New Stream also announced that its existing Bermuda Fund would be closing, and all foreign investors would have to move their investments into the Cayman Fund.

Rather than transfer into the new structure, New Stream’s largest investor placed a redemption on its whole investment in the Bermuda Fund in March 2008. At risk of losing their largest investor, Bryson, co-managing partner Bart Gutekunst and chief financial officer Richard Pereira set in motion a scheme to secretly keep the Bermuda Fund open and give priority to Bermuda Fund investors in an effort to reverse the redemption.

As part of the scheme, Bryson, Gutekunst and Pereira had New Stream staff secretly execute documents to effectuate the Bermuda Fund’s special priority. They failed to inform investors who had transferred from the Bermuda Fund into the Cayman Fund that the Bermuda Fund was remaining open or that it was being given priority over the Cayman Fund. Moreover, New Stream continued to market to investors by concealing from them the magnitude of the actual pending redemptions and by using deceptive marketing materials that failed to disclose the existence of New Stream’s Bermuda Fund.

Through this scheme, New Stream investors were defrauded out of more than $46 million. One of the investors deceived and victimized by the conspirators was an employer retirement trust covered by the Employee Retirement Income Security Act (ERISA). Employees participating in the trust lost millions of dollars in retirement savings.

From April 2008 to December 2010, Bryson collected more than $5 million in management fees and profit sharing while participating in this fraud scheme.

Bryson, Gutekunst and Pereira each pleaded guilty to one count of conspiracy to commit wire fraud in May 2014. Gutekunst and Pereira are scheduled to be sentenced on May 6 and May 7, respectively.

“A prison term is an appropriate result for such criminal conduct. I thank the FBI, Department of Labor OIG and SEC for their work in unraveling this scheme,” First Assistant U.S. Attorney Michael J. Gustafson said in a press release.

This matter was investigated by the Federal Bureau of Investigation and the U.S. Department of Labor, Office of Inspector General, with the assistance of the Securities and Exchange Commission.

Image via Shutterstock

Want more Ridgefield news? Sign up below!