Feds indict Sentinel CEO and trader on fraud

Lomg wait for justice

Grede has clawed back money from the owners of Sentinel shortly after the bankruptcy as well as settling a suit with hedge fund Citadel and Goldman Sachs. Citadel acquired Sentinel customer securities at a discount in a noncompetitive bulk sale just prior to the bankruptcy. Goldman was the immediate transferee of the securities and shared in Citadel’s profits.

Grede says customers have only received, on average, about 35¢ on the dollar. He has several clawback cases, the largest one in October, involving about 15 FCMs who received all or a significant portion of what was owed them while other customers were left with nothing. “My position is that all customers should share equally in the loss,” Grede says.

A handful of customers received 100% of their assets from Sentinel after it sent a letter stating it had halted redemptions. Other customers received 70¢ on the dollar after one pool of assets was sold to Citadel.

Grede also is awaiting a decision from the Seventh Circuit Court of Appeals on a $340 million lawsuit the trustee filed against the Bank of New York Melon (BONY). BONY was the clearing bank, lender, and depository for investment pools for Sentinel.  Sentinel allegedly used customer segregated accounts held at BONY as collateral for loans it received from the bank.

The Commodity Futures Trading Commission and the Securities and Exchange Commission, which assisted in the investigation, have filed separate civil enforcement lawsuits following the collapse of Sentinel, which remains in bankruptcy proceedings.

 

 

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