A hedge fund manager has been charged for a scheme that profited from dying patients

Donald Lathen, a hedge fund manager at Eden Arc Capital Management, has been charged with a fraudulent scheme involving the terminally ill.The Securities and Exchange Commission announced Monday that it is pressingfraud charges against Lathen and his firm. Lathen alledgedly identified patients withless than six months to live, andgot 60 of them tobecome co-owners of brokerageaccounts. He is alleged to have paid $10,000 a time to use their name on accounts.Hethen pulled the money out as soon as those people passed away.Here is the SEC on the case:An SEC examination of investment advisory firm Eden Arc Capital Management uncovered the scheme alleged by the SEC Enforcement Division in an order instituted today. Donald Lathen of New York City allegedly used contacts at nursing homes and hospices to identify patients with less than six months to live, and he successfully recruited at least 60 of them by paying $10,000 apiece to use their names on accounts. When a patient died, Lathen allegedly redeemed investments in the accounts by falsely representing to issuers that he and the terminally ill individuals were joint owners of the accounts. Lathens hedge fund was the true owner of the survivors option investments. Issuers paid out more than $100 million in early redemptions as a result of the alleged misrepresentations and omissions by Lathen and Eden Arc Capital."The SEC Enforcement Division further alleges that Lathen violated the custody rule by failing to properly place the hedge funds cash and securities in an account under the funds name or in an account containing only clients funds and securities, under the investment advisers name as agent or trustee for the client.We allege that Lathen deceived issuers by falsely claiming that he and the deceased jointly owned the bonds when the hedge fund was the true owner of the investments, said Andrew M. Calamari, Director of the SECs New York Regional Office. Lathen allegedly put hedge fund client assets at risk by keeping them in accounts in his and the terminally ill individuals names rather than following the custody rule.Lathen was formerly a managing director and co-head of energy M&A at Citigroup, and a managing director at Lehman Brothers, according to his LinkedIn profile.There will be a public hearing before an administrative law judgeto decideif any remedial actions are appropriate, according to the press release.SEE ALSO:Finishing a building in China takes a lot longer than it used toJoin the conversation about this storyNOW WATCH: Warren Buffett's sister needs your help giving away millions
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