Beverly Hills hedge fund manager Bradley L. Ruderman surrendered to FBI agents Friday after being criminally charged in federal court in Los Angeles with bilking investors out of about $44 million in a wire fraud scheme.
Ruderman's surrender came two weeks after a federal judge shut down his hedge funds, Ruderman Capital Partners and Ruderman Capital Partners A, in response to a civil suit filed by the Securities and Exchange Commission. The commission alleged that Ruderman raised the money for his funds by claiming returns as high as 60% through stakes in high-profile companies such as Apple Inc., Microsoft Corp. and Wal-Mart Stores Inc.
The FBI filed its affidavit naming Ruderman on Thursday. In court documents, the FBI said its investigation revealed that Ruderman, 46, spent at least $8.7 million of investor money on personal expenses, including a summer rental on Malibu's Carbon Beach and two Porsches.
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 Beverly Hills luxury hotel, documents said.
The complaint alleges that Ruderman raised more than $44 million over the last eight years from 22 investors, many of whom were family or friends. Lawyers representing Ruderman didn't respond to requests for comment Friday.
Ruderman was released Friday afternoon on $500,000 bail.
The scheme, which started in 2002, fell apart April 15 when one of Ruderman's attorneys sent a letter to investors stating that the hedge funds held little value, court documents said.
Ruderman is accused in the FBI's criminal complaint and the SEC's civil complaint of sending false account statements to investors showing high returns and a value of more than $200 million in fund assets, when he had lost millions of dollars a year and the funds were valued at only a few hundred thousand dollars.
"The SEC has its own investigation and the FBI has its own investigation," said Assistant U.S. Atty. Ranee Katzenstein.
"Because of both investigations, separate investigations, Mr. Ruderman now faces both civil and criminal liabilities for the same actions."
Ruderman's arraignment is scheduled for June 15, and he faces a maximum of 20 years in federal prison if convicted on the wire fraud charge alleged in the criminal complaint, according to Katzenstein.
The SEC is seeking injunctions preventing Ruderman from continuing to operate his funds, repayment for investors and financial penalties against Ruderman and his funds.