Hedge Fund 3 Degrees Asked to Close by Singapore Regulators on Asset Claim
By Andrea Tan – Oct 18, 2011 11:31 PM ET
3 Degrees Asset Management, a hedge fund which helps manage $215 million, was asked by Singapore’s central bank to shutter its operations following allegations that founder Moe Ibrahim diverted assets.
3 Degrees is trying to overturn a decision by the Monetary Authority of Singapore and the finance minister to withdraw its exempt fund manager status effective Nov. 9 and ask it to wind down, according to a lawsuit filed with the Singapore High Court this month. A closed hearing is scheduled for Oct. 20.
The MAS probed the Singapore-based manager after one of its funds sued Indonesian-born Agus Anwar in 2008 to recover at least $40 million in debt. Anwar then claimed that Ibrahim diverted $6.7 million from the fund to 3 Degrees, which is wholly owned by Ibrahim. 3 Degrees, which focuses on distressed debt, denied the allegations in its lawsuit.
Even if there was such a transaction, it was neither “illegal or improper,” 3 Degrees said in its court filings. The hedge fund manager said a fine would have been an appropriate punishment.
Ibrahim declined to comment on the lawsuit or the status of 3 Degrees on Oct. 17. The fund has also asked the court to prevent the announcement of the regulator’s decision, according to the lawsuit.
Ibrahim was named one of the 20 Rising Stars of Hedge Funds by trade publication Institutional Investor in 2007.
“It is inappropriate for MAS to comment on this matter at this point in time,” the Monetary Authority said in an e-mail yesterday.
The capital markets regulator decided that 3 Degrees and Ibrahim weren’t fit and proper persons to be in the regulated activity of fund management, according to the hedge fund’s lawsuit. The finance minister affirmed the decision to withdraw the fund’s exempt status.
Hedge funds have come under increased scrutiny after the collapse of Lehman Brothers Holdings Inc. in 2008, while volatile trading conditions have made it harder for them to raise capital. Assets managed by Asian hedge funds fell 23 percent to $135 billion in August from a peak of $176 billion in 2007, according to Singapore-based Eurekahedge Pte.
Attempts by Bloomberg News to reach Anwar weren’t successful.
Fund managers with fewer than 30 qualified investors are exempted from licensing and business conduct requirements under Singapore’s Securities and Futures Act. 3 Degrees has stopped accepting new clients, according to the lawsuit.
Allowing the withdrawal of 3 Degrees’ exempt status would leave the fund with no bargaining power to liquidate assets and would “create a bad precedent for the future,” it said in court papers.
3 Degrees called the decision “draconian” and said it was based on “illogical, irrational and unreasonable” statements and assumptions, according to its lawsuit.
“Other hedge fund managers would face the same risk and may become over-cautious for fear of having their own exemptions withdrawn,” Ibrahim said in the filings.
“The authority would appear to be sending out a signal that all it takes are strong allegations from a desperate, debt- ridden party without conclusive evidence to corroborate these allegations or a disgruntled employee for a withdrawal of an exemption or license to occur,” he said.
The case is 3 Degrees Asset Management Pte v Attorney General and Monetary Authority of Singapore OS874/2011 in the Singapore High Court.
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