A Hong Kong fund manager who siphoned $194.5 (€154.7m) million of clients’ cash into dummy companies to hide losses in other investments has been jailed for four and a half years.
Charles Schmitt left more than 1,000 clients out of pocket when his illicit acts triggered the collapse of the CSA Absolute Return Fund in 2004.
The 61-year-old former senior business manager at the New York Stock Exchange “conjured up a remarkably sophisticated scheme,’’ deputy judge Esther Toh said, noting that had the acts of a whistleblower within the firm not come to light “one wonders how many more investors would have been lured into the scheme”.
Schmitt had admitted 19 charges of false accounting at Hong Kong’s High Court. He led clients to believe they were investing in well-known funds, but actually diverted the money into shell companies with very similar names. Schmitt used the money to cover losses in other funds.
A shortfall of $32.5 million was left in the liquidation, and additional costs have taken the total loss so far to $46.6 million. While more than 200 clients have been fully paid, nearly 850 are still waiting to be reimbursed. It is expected they will receive 60% to 70% of their investment.
