Daily City hedge fund fraudster arrested at SFO, released on $1 million bail

January 9, 8:25 AMSF Financial Fraud ExaminerPaul Springer

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A hedge fund manager accused of fraud in a 2007 civil suit was arrested at San Francisco International Airport this week after federal authorities indicted him on related criminal charges.

Alexander Trabulse claimed annual returns as high as 200% for his Fahey Fund, according to the complaint filed by the Securities and Exchange Commission in 2007.

The Commission alleged that Trabulse used a mailbox on the 200 block of Bush Street--San Francisco's financial district--to imply that he had a business with offices there. Trabulse was charged with several violations of the Securities Act, particularly provisions involving fraud and use of communication.

The complaint further alleges that Trabulse lured in investors with claims of absurdly high returns after the fund was founded in 1997. By 2006, he had about 100 investors, all of whom were receiving falsified account documents claiming high returns.

In reality, returns were negative, and Trabulse was squandering client cash on purchases like travel to France and Panama, spending sprees in foreign locales, and a $25,000 home theater system for his wife (now ex-wife). He also allegedly funded a golf start-up company and bought the proprietor a BMW.

Since being sued by the SEC and ordered to pay a $250,000 civil penalty, Trabulse had been spending about half his time in France. He received a warm welcome from the FBI when he arrived at SFO this Monday. 

An affidavit filed by the FBI states that by 2006 Trabulse had 165 investors who were under the erroneous impression that their collective investments were worth $50 million, when the actual value was more like $12 million. Investors also believed their capital was invested in securities, but much of it was "invested" in rugs, jewelry, and real estate. The affidavit states that Trabulse owns homes in France and Panama.

Ultimately, investors may have lost only about $3 million in one analysis, which is a bargain these days. Still, the accounting is pretty murky at this point.

Trabulse was released on $1 million bail and faces as much as 30 years in prison on the FBI's charges.