Huntington Hedge Fund Manager Guilty in $700M Fraud

By Rupert Deedes

Edward Walczak, former portfolio manager for the Huntington, N.Y.-based Catalyst Capital Advisors, was found guilty of perpetrating an investment fraud that lost investors over $700 million.

The U.S. District Court in the Western District of Wisconsin found Walczak liable for engaging in fraudulent and deceitful conduct toward investors, potential investors, and investment advisors.

The 5-day trial was the result of action brought by the US Commodity Futures Trading Commission (CFTC) against Walczak on 27 January 2020, which alleged that he misrepresented how he managed risk in the Catalyst Hedged Futures Strategy Fund.

The CFTC charged that between December 2016 and February 2017, Catalyst and Walczak lied to investors by falsely claiming that his firm abided by a strict set of risk parameters - investment rules - which would prevent losses of more than 8 percent. But that claim by Walczak was not true.

“The fund lost hundreds of millions of dollars–approximately 20 percent of its value–from December 2016 through February 2017 as markets moved against it,” charged the CFTC.

“True and accurate disclosures are critical to investor protection,” said CGTC’s Acting Director of Enforcement Vincent McGonagle. “As we said at the outset of this case, the CFTC is committed to holding accountable individuals who misstate the risks of investing in their products.”