SEC charges LightSquared's Falcone with securities fraud

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The SEC is going after Philip Falcone, the beleaguered hedge fund manager behind Harbinger Capital Partners and the now-bankrupt LightSquared LTE initiative, filing civil fraud charges on Wednesday. In a statement, the director of the SEC’s Division of Enforcement said the charges "read like the final exam in a graduate school course in how to operate a hedge fund unlawfully."

Falcone allegedly lent himself $113 million from a Harbinger fund

Two separate complaints were filed against Harbinger, Falcone, and Harbinger’s COO Peter Jenson. The first alleges that Falcone (aided and abetted by Jenson) fraudulently loaned himself $113.2 million from a Harbinger fund in order to pay his personal taxes. It also alleges that in exchange for votes that would restrict investors' ability to withdraw money from a Harbinger fund, Falcone cut side deals with favored large investors, letting them take their own money out but making it harder for other investors to do the same. The second complaint is related to bond price manipulations — allegedly, Falcone artificially constricted the supply of some high-yield bonds, making it impossible for short-sellers to profit from the bonds’ falling prices.

Falcone’s lawyer, Matthew Dontzin, said the allegations were "without merit and will all be vigorously defended in the courthouse."

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