Former MIT dean, son sentenced in hedge fund scam that suffered $140 million in losses
A former MIT associate dean and his son were sentenced Monday for convincing investors to put more than $500 million into their fraudulent, unsuccessful hedge fund that drained $140 million in investors’ money, according to the U.S. Attorney’s Office District of Massachusetts.
Gabriel Bitran, 70, of Newton, and his son, Marco Bitran, 40, of Brookline, were each sentenced to 45 months in prison, three years of supervised release, and forfeiture and restitution of over $11 million, authorities said Wednesday. Gabriel Bitran was once a professor and the associate dean of MIT’s Sloan School of Business, and Marco Bitran is a money manager who earned a degree from Harvard Business School.
The pair pleaded guilty last year to securities fraud and obstruction of justice in connection to the hedge fund scam, The Boston Globe reported.
The Bitrans launched their hedge fund business in 2005 and operated it through 2011, soliciting investments by falsely stating that they had been in business for eight years, authorities said. They told potential investors that they had delivered investment returns that ranged between 16 and 23 percent using a model Gabriel Bitran had developed at MIT to guide their investments and said they had evaded any down years during that period, according to the U.S. Attorney’s office.
Over those six years, the Bitrans raked in $500 million in investments, personally taking millions in management fees — even when the hedge fund was operating at significant losses, authorities said. In 2008, the Bitrans lost between 50 and 75 percent of their investors’ principals, yet refused to pull the remaining money — even at investors’ requests, according to the U.S. Attorney’s office.
At the same time, the Bitrans removed about $12 million of their own money from the fund, shielding their personal finances from the faltering fund, authorities said.
Authorities began to investigate the Bitrans just as their business was taking a turn for the worst. The United States Securities and Exchange Commission (SEC) requested the two turn over documents that supported their claims of successful earning rates, and the Bitrans responded with distorted records, making false statements in regard to the status of the investments, according to the U.S. Attorney’s office.
Meanwhile, the two openly acknowledged the scam to one another in emails, released by the U.S. Attorney’s office.
“We have mislead [sic] a lot of people with a range of statements that were incorrect simply to increase our income,’’ Gabriel Bitran wrote to his son in 2009. “A person with the experience and knowledge of the financial sector and a veteran professor of MIT should not have engaged in this type of behavior . . . They are not idiots, they know that we mislead [sic]. The penalty for this type of action is Full restitution, which obviously we cannot afford.’’
Still, the scheme continued. Throughout the next two years, the Bitrans moved their assets from the hedge fund and their businesses to places where their names would be harder to pinpoint — sometimes using the name of a family member without his or her consent, authorities said.
“We are sharing equally in this dad,’’ Marco Bitran wrote in a 2009 email to his father. “Lots of our problems were caused by my good intentions but very poor actions when it came to true honesty.’’
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