U.S. authorities are probing individuals close to NIR Group on whether the U.S. hedge fund firm paid kickbacks to outsiders to inflate the value of its holdings, the Wall Street Journal said, citing people familiar with the matter.
U.S. authorities have been investigating the company since last year on whether managing member Corey Ribotsky defrauded investors about their returns and the holdings of his various funds, according to the paper.
Ribotsky managed more than $780 million in hedge fund assets last year. The company reported eight years of positive returns in its biggest fund starting 2001, the paper said.
NIR invests its hedge-fund assets mainly in small public companies through privately negotiated deals and mostly receives notes that could be converted into stock at a discounted rate, the article said.
The people told the paper that the authorities are investigating whether NIR valued certain notes at a higher level than the underlying value of the companies'.
Investigators are trying to ascertain whether people with financial ties to outside companies got kickbacks in exchange for helping NIR inflate values of its investments, the paper added.
One person told the paper that prosecutors from the U.S. Securities and Exchange Commission, FBI and the U.S. Attorney's office in Brooklyn have interviewed several people close to the company.
Ribotsky's lawyer, Jordan Hershman of Bingham McCutchen LLP, told the Journal: The company is cooperating fully with the investigation. It is confident that the facts will show that NIR and Mr. Ribotsky acted properly at all times.
Officials at the SEC, FBI and U.S. Attorney's office declined to comment to the paper.
Reuters could not reach U.S. authorities and the fund's lawyers for comment outside normal U.S. business hours. (Reporting by Archana Shankar in Bangalore; Editing by Lisa Von Ahn)