Gabriel Bitran, former deputy dean of MIT’s business school and his son plead guilty to operating a $500 million hedge fund scam.
Bitran taught at MIT for 35 years and served as deputy dean for five years. As chairman of the Sloan search committee in 2007, he recruited David Schmittlein as Dean from Wharton in 2007.
Bitran falsely told clients that hedge fund he ran with his son, GMB Capital Partners, was delivering annual returns between 16% and 23%.
Following the Lehman Shock of 2008, several of the Bitrans’ hedge funds had disastrous losses causing investors to lose 50% -75% percent of their principal.
Some of the money was invested with pyramid investment swindler Bernard Madoff, who was convicted in 2009 of defrauding investors of billions of dollars and was sentenced to 150 years in prison.
The Bitrans withdrew about $12 million of their own money from the hedge funds, prosecutors allege, while forcing customers to wait to redeem money from their GMB Capital Management, later renamed ClearStream Investments.
He falsely claimed that the money would be invested using a complex trading model based on research Gabriel Bitran conducted at MIT. In fact, they placed investor money with Bernie Madoff and the Petters Group Worldwide, both of which were later found to be Ponzi schemes.
If the plea agreements are accepted by a judge, the two could face between two and five years in prison. They could also be forced to pay as much as $290 million in fines plus payments to victims.
In 2012, the two men settled charges brought by the Securities and Exchange Commission by agreeing to pay $4.8 million and to be barred from the securities industry.
For more details see The Boston Globe
