Baystar and its Founder Charged with Wire Fraud

Lawrence Goldfarb

Lawrence Goldfarb, the founder of hedge fund Baystar Capital Management, was charged along with his firm for siphoning money from side-pocket accounts into his own pocket. Goldfarb struck a deal to defer prosecution – if he plays ball with the prosecutors and makes full restitution of $12 million, the charges will be dropped. Nice deal! Still, it’s better to repay the stolen money than to fight charges endlessly.

Baystar Capital had $100 million under management, of which $12 million was segregated in a “side pocket” – a special investment fund.  And this one was indeed special to Mr. Goldfarb, who pushed fund money into an unauthorized real-estate fund and a record company. Of course, some of the money went to personal and charitable expenditures – once you start dipping into the cookie jar, it’s so hard to stop!

"Goldfarb betrayed the trust of his hedge fund's investors, keeping them in the dark about their investment profits so he could use their money as his own," said Marc Fagel, head of the Security and Exchange Commission's office in San Francisco. Ya think?

Eric Bank, Freelance Writer