Hedge Fund Manager Accused of Bilking Clients for Race Car Hobby
(Bloomberg) -- Hedge fund manager Andrew Franzone was charged with defrauding investors of almost $40 million in part to fund his lavish lifestyle, including buying an aircraft hangar for his private race car collection.
Franzone, 44, was arrested Thursday in Fort Lauderdale on charges of securities and wire fraud, according to federal prosecutors in Manhattan.
From August 2014 to September 2019, Franzone fraudulently convinced more than 100 investors to plow money into one of his funds. He told them he was running a highly liquid portfolio that traded options and preferred stock, according to the U.S. Attorney’s Office for the Southern District of New York.
Instead, Franzone, a racing aficionado, diverted most of the money into high-risk, illiquid private investments. He also lied to investors about the fund’s performance and assets under management and diverted some of the money for his personal use, including the hangar for his cars.
Franzone faces a maximum potential sentence of 20 years in prison.
The U.S. Securities and Exchange Commission also sued Franzone, saying he didn’t disclose numerous conflicts to investors, including personal loans he took from several companies that the fund invested in. Franzone “generally can be found in Miami,” but he doesn’t acknowledge having a fixed residential address, according to the SEC’s complaint.
Robert Welsh, an attorney for Franzone, declined to comment.
Franzone spoke about his love of Nascar racing in 2016, telling the Wall Street Journal that his car collection included the No. 28 Ford Galaxie, the car that Fred Lorenzen won the Daytona 500 with in 1965.
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