Brookline Man Pleads Guilty in $500M Hedge Fund Scam

Marco Bitran, a Brookline resident with ties to Bernie Madoff, on Wednesday pleaded guilty to a $500 million hedge fund scheme.

Bitran, 39, admitted to running the scheme with his father, Gabriel, 69, of Newton. Gabriel Bitran is a former professor and associate dean at the Massachusetts Institute of Technology’s Sloan School of Business.

Authorities said from 2005 through 2011, the pair ran GMB Capital Management and lied to investors about huge returns ranging from 16 to 23 percent, with no down years. The pair told investors they were using a complex trading model developed by Gabriel Bitran based on his MIT research. He later admitted that was a lie.

Investors lost more than $140 million, authorities said.

“Gabriel and Marco Bitran cheated their victims out of hundreds of millions of dollars of their retirement money and savings by lying to them over and over again and claiming false returns and profits,” said Vincent Lisi, of the FBI’s Boston division.

Bloomberg reported the pair invested clients’ money in funds managed by Bernie Madoff, who was convicted of running the largest Ponzi scheme in history.

“Investment returns that seem too good to be true—such as those offered by the Bitrans—should be a signal to investors to stay clear,” said William Offord, of IRS Criminal Investigation, in a statement.

Added U.S. Attorney Carmen Ortiz: “No one is above the law. Here, a highly respected MIT professor and his well-educated son used their connections to lure investors.”

Authorities released emails the pair sent each other:

Gabriel Bitran, July 2009

“We have mislead [sic] a lot of people with a range of statements that were incorrect simply to increase our income. . . . A person with the experience and knowledge of the financial sector and a veteran professor of MIT should not have engaged in this type of behavior. . . . I certainly do not blame you for everything that happened; we both share responsibility. . . . With [several named individuals] and probably a few others . . . we told them a story that was not true! . . . In my view you are discarding their anger as bad losers. This is not the whole story. They are not idiots, they know that they were mislead [sic]. The penalty for this type of action is Full [sic] restitution, which obviously we cannot afford.”

Marco Bitran, Sept. 2009

“We are certainly sharing equally in this dad. . . . Lots of our problems were caused by my good intentions but very poor actions when it came to true honesty.”

Authorities said the Bitrans could be sentenced to up to five years in jail, along with a $10 million fine.

The investigating agencies included the U.S. Attorney’s Office, Securities and Exchange Commission, and IRS Criminal Investigations.