SEC Charges Philip Falcone And Harbinger With Securities Fraud

6/27/2012 2:51 PM ET

Billionaire hedge-fund manager Philip Falcone and his advisory firm Harbinger Capital Partners have been charged with securities fraud, the Securities and Exchange Commission announced Wednesday.

The SEC said that the charges stem from illicit conduct that included misappropriation of client assets, market manipulation, and betraying clients.

The filing from the SEC alleges that Falcone used fund assets to pay his taxes, conducted an illegal "short squeeze" to manipulate bond prices, and secretly favored certain customers at the expense of others.

Additionally, Harbinger is accused of unlawfully purchasing equity securities in a public offering after having sold short the same security during a restricted period.

Robert Khuzami, Director of the SEC's Division of Enforcement, said, "Today's charges read like the final exam in a graduate school course in how to operate a hedge fund unlawfully."

The SEC said it is seeking disgorgement of ill-gotten gains, prejudgment interest, and civil money penalties from Falcone and Harbinger.

by RTT Staff Writer

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