Philip Falcone, the embattled hedge fund billionaire who runs Harbinger Capital, will soon be battling a Securities & Exchange Commission lawsuit, according to a Bloomberg News report. The SEC will go after Falcone with claims he improperly took loans from his funds to pay taxes and gave certain investors like Goldman Sachs the chance to cash out of his hedge fund ahead of other investors, Bloomberg reported.
Falcone is poised to fight the regulators now that the SEC has voted to pursue the enforcement action against him and Harbinger. The SEC has been investigating Falcone for a long time and last year he reportedly rejected a settlement offer that would have banned him from the securities industry and effectively ended his career.
Still, Falcone’s prominent stature in the investment world has already taken a huge hit. In addition to the pending SEC charges, Falcone’s big bet on Lightsquared has floundered as the wireless communication firm his hedge fund backed filed for bankruptcy protection last month.
Falcone now manages a fraction of the $26 billion his hedge fund had under management at its peak. His claim to fame was betting against subprime mortgages just prior to the housing bust. But his hedge funds got clobbered last year amid the Lightsquared disaster. Falcone’s fund recently entered into a high-interest financing arrangement with Michael Dell’s MSD Capital, but it looks like he is going to have to fight to keep his investing empire together.
Indeed, Falcone's lawyer, Matthew Dontzin, came out swinging. "Any allegations by the SEC of improprieties by Mr. Falcone or Harbinger are neither supported by the facts nor the law," Dontzin said in a statement. "Should a lawsuit be brought it will be contested vigorously."
