Appearing before U.S. District Judge John F. Walter heard Mr. Ruderman’s admission that he took approximately $44 million from approximately 22 investors while claiming returns of approximately 60% annually. Specifically, he pled guilty to two counts each of wire fraud and investment fraud. Here is the SEC press release announcing their formal complaint in which they froze Ruderman's assets.
Mr. Ruderman orchestrated his scheme via his firm, Ruderman Capital Partners. He surrendered to federal agents in May. In April Mr. Ruderman sent a letter to investors claiming that the firm’s funds were almost entirely gone. Mr. Ruderman had spent $8.7 million on a myriad of personal expenses. The list includes two Porches. He also had over $5 million in Poker losses.
Adding to the laundry list of problems, Bloomberg is reporting that Mr. Ruderman lied about the identity of his investors claiming that Lowell Milken (chairman of the Milken Family Foundation) and Larry Ellison (Chief Executive Officer of Oracle Corp.).
While a famous investor may not always take a call if a hedge fund manager is touting their relationship with a particularly dazzling or well respected investor it would behoove any investor to pick up the phone or send an email to at least attempt to confirm the relationship If the prestigious investor picks up the phone you may be able to garner more color on the details of their relationship with a particular manager. Should you not be able to confirm the relationship, at the very least as an investor you will sleep better at night knowing that you tried. Further, the hedge fund manager should be able to explain why their highly respected investors won’t return your call – and it should be a good indicator or a yellow flag at the least which would add another data point to your operational due diligence process.
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