In June 2012, the SEC filed a lawsuit against hedge fund adviser Philip Falcone and his advisory firm, Harbinger Capital Partners LLC, for alleged misappropriation of client assets, market manipulation, and betraying clients. Among other things, the SEC alleged that Falcone used hedge fund assets to pay his own taxes, conducted an illegal “short squeeze” to manipulate bond prices, secretly favored certain customers at the expense of others, and unlawfully bought equity securities in a public offering after having sold short the same security during a restricted period. The Enforcement Director at that time, Robert Khuzami, commented that the SEC’s charges “read like the final exam in a graduate school course in how to operate a hedge fund unlawfully.”
