Hedge Fund Manager Who Raised $44 Million in Scheme That Bilked Relatives Pleads Guilty to Fraud Charges

The founder and manager of two Beverly Hills hedge funds pleaded guilty today to federal fraud charges, admitting that he ran a Ponzi scheme targeting family members who suffered losses of more than $25 million.

Bradley L. Ruderman, 46, of Beverly Hills, pleaded guilty to two counts of wire fraud and two counts of investment adviser fraud related to the Ponzi scheme he ran from 2003 through 2009. Ruderman also pleaded guilty to a misdemeanor count of failing to file a federal income tax return for the year 2007.

Appearing this morning before United States District Judge John F. Walter, Ruderman admitted that he collected more than $44 million from investors, many of whom were family members who were promised annual returns as high as 60 percent. Ruderman admitted that he used much of the money to pay his own expenses and that he hid the misappropriation of investor money from his victims by sending them phony account statements that purported to show gains in their accounts. When the funds collapsed in April, Ruderman’s investors had lost more than $25 million.

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. 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 he actually had only $588,246 under management at the beginning of this year.

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. Ruderman further 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 also pleaded guilty to failing to file his federal income tax return for 2007, a year in which he admitted earning more than $2 million. As part of his plea agreement with the government, Ruderman admitted that he failed to report income every year since 2004. He has agreed to file tax returns for those years and to resolve all taxes, penalties and interest due to the government.

Judge Walter is scheduled to sentence Ruderman on December 7. As a result of today’s guilty pleas, Ruderman faces a statutory maximum sentence of 51 years in federal prison. 
This case was investigated by the Federal Bureau of Investigation and IRS-Criminal Investigation.

In April, the U.S. Securities and Exchange Commission obtained a court order against Ruderman, see: http://www.sec.gov/litigation/litreleases/2009/lr21017.htm.