The Serious Fraud Office has come under pressure to explain why it dropped an investigation into a hedge fund manager after the FSA announced plans to ban and fine its chief executive for not being fit and proper.
On Tuesday, the FSA announced plans to fine former Dynamic Decisions Capital Management chief executive Alberto Micalizzi £3m and ban him from performing any role in regulated financial services for not being fit and proper. The £3m fine is the largest for an individual in a non-market abuse case.
The FSA says in late 2008, Micalizzi lied to investors about the true position of the fund and entered into a number of contracts, on behalf of the fund, for the purchase and resale of a bond to conceal the losses. Micalizzi and DDCM have referred the matter to the Upper Tribunal.
According to The Times, legal experts say the severity of the case raises the question of why the SFO decided to drop its eight month investigation into the firm in 2010.
Eversheds partner Jonathan Crook said: “This has all the hallmarks of a classic Ponzi-type scam.”
The FSA decision notice for Micalizzi, dated March 20, states that between October 1, 2008 and December 31, 2008, the master fund managed by DDCM suffered catastrophic losses of over $390m, approximately 85 per cent of its value.
Speaking to The Times, the SFO said: “There was insufficient evidence at the time and there was not a reasonable likelihood then that sufficient and relevant evidence would materialise for a realistic prospect of conviction.”