Beverly Hills Hedge Fund Manager Who Raised $44 Million Faces Charges After Fund Value Drops to Nearly Zero

The founder and manager of two Beverly Hills hedge funds was taken into custody this morning when he surrendered to federal agents after being charged in federal court with bilking investors out of approximately $44 million. Bradley L. Ruderman, 46, who has quoted as a financial expert in national media outlets, surrendered to special agents with the Federal Bureau of Investigation. Ruderman surrendered after was named yesterday in a criminal complaint filed in United States District Court in Los Angeles that charges him with wire fraud.

The criminal complaint alleges that Ruderman raised $44.3 million over the past eight years from 22 investors with claims of annual returns as high as 60 percent. Many of the victim-investors were family members who received a letter last month informing them that Ruderman’s hedge funds were nearly worthless.

Ruderman used false and misleading statements to persuade family members, friends and others to invest in his two hedge funds, Ruderman Capital Partners and Ruderman Capital Partners A, according to the affidavit in support of the complaint. During the scheme, which started in 2002 and collapsed this year, Ruderman lied about profits made by the funds, repeatedly sent false account statements to investors, and reported that he had $206 million in funds under management, when in fact he lost more than $3 million in 2008, beginning 2009 with a net value of only $588,246.

The FBI investigation revealed that Ruderman spent at least $8.7 million of investor money on personal expenses, which included a summer rental on Malibu's Carbon Beach and two Porsches. During a recent interview with the FBI, Ruderman admitted that he lost $5.2 million of investor money in clandestine poker games held on a regular basis in a suite at a luxury Beverly Hills hotel.

Ruderman is expected to make his initial court appearance this afternoon.

A criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.

If he is convicted of the wire fraud charge alleged in the criminal complaint, Ruderman faces a statutory maximum sentence of 20 years in federal prison.

This case was investigated by the Federal Bureau of Investigation.

Two weeks ago, the Securities and Exchange Commission filed a civil
lawsuit against Ruderman, see: http://www.sec.gov/litigation/litreleases/2009/lr21017.htm.

CONTACT: Assistant United States Attorney Ranee Katzenstein
Major Frauds Section
(213) 894-2432
Assistant United States Attorney Cheryl O'Connor Murphy
Major Frauds Section
(213) 894-0759