The alleged fraud committed by banker Andrew W. W. Caspersen may be bigger than prosecutors have initially said.
Caspersen was arrested for attempting to defraud sophisticated investors out of $95 million.
The Wall Street Journal reports that he also took money from family members and a close friend.
Caspersen’s mother, Barbara, and at least two of his brothers were victims, investing more than $3 million, the report said. In 2009, Caspsersen’s father, Finn M. W. Caspersen — a prominent financier — committed suicide.
One of his friends and fellow Princeton alum, William Krusen, also invested with him, the report said.
The Southern District of New York’s complaint against Casperesen does not mention these alleged victims.
On Saturday, March 26, Caspersen, a former managing director at PJT Partners’ private-equity arm, Park Hill Group, was arrested at New York’s LaGuardia Airport upon returning from a family vacation in Florida.
He spent the weekend in jail and on Monday he was formally charged with one count securities and one wire fraud related to the scheme. If convicted, he faces up to 20 years for each account — a maximum sentence of 40 years. He’d also face fines.
The complaint said the 39-year-old defrauded a hedge-fund-affiliated charity and an employee of the same hedge fund.
Shortly after Caspersen’s arrest, The Moore Charitable Foundation, an environmental charity founded by hedge fund billionaire Louis Bacon, confirmed it was a victim.
“The Foundation was lied to by Andrew Caspersen, a managing director at investment bank PJT Partners, regarding a potential investment related to the publicly-announced restructuring of a private equity fund,” the foundation said in a statement. “The Foundation put approximately $25 million of its endowed funds toward the investment. The investment was made into an account that appeared to be for an Irving Place vehicle involved in the transaction, but actually was under the control of Mr. Caspersen.”
James H. McIntyre of Moore Capital Management was soon after identified as the hedge fund employee. McIntyre, identified only as “Individual 1” in the complaint, was defrauded out of $400,000 by Caspersen, according to prosecutors.
Both Caspersen and McIntyre attended Princeton University and graduated in 1999. They were not close friends, a person familiar said.
As the Securities and Exchange Commission’s Andrew Calamari put it, “Even sophisticated institutional investors are not immune to financial scams.”
In October 2015, Caspersen reached out to McIntyre via email about a “new investment” he was working on and in which he was personally investing, the complaint said.
According to the complaint, Caspersen solicited money for a shell company he called Irving Place III SPV LLC. Irving Place sounded similar to Irving Place Capital Partners III SPV, a legitimate private-equity fund that’s not associated with Caspersen. Caspersen falsely told investors that their investment would be secured by the $900 million of assets of Irving Place Capital Partners III SPV.
In November, Caspersen received $24.6 million from The Moore Charitable Foundation and $400,000 from McIntyre, who evaluated and recommended investments for The Moore Charitable Foundation.
Caspersen’s Irving Place had “no legitimate business operations,” the complaint said.
Instead of investing the money, Caspersen placed it in a brokerage account for his “personal use.” He lost most of it from “aggressive options trading” in the SPDR S&P 500 Trust ETF from November through December. As of December 31, 2015, his brokerage account had a net loss of $25 million, the complaint said.
In early March, Caspersen tried to solicit another $20 million from The Moore Charitable Foundation and another $50 million from KKR, identified as “Firm-5” in the complaint, according to the Wall Street Journal. KKR did not invest after the private equity fund’s legal counsel asked to be put in touch with Caspersen’s counsel, the complaint said.
When questions were raised by McIntyre from Moore Capital, the complaint said Caspersen created fake email addresses and misleading domain names and invented fictional financiers in an attempted cover-up.
A representative at Moore Capital did an investigation and found that one of the email domain addresses had been created about 20 minutes after McIntyre questioned Caspersen in a telephone call. The Moore Capital rep also learned that one of the financiers Caspersen had referred to did not exist.
That’s when the Moore Charitable Foundation contacted PJT’s general counsel:
When the Foundation detected irregularities in a proposed follow-on deal, it swiftly notified PJT Partners’ General Counsel’s Office and cooperated with PJT in their investigation of the issue. Importantly, the Foundation did not wait to recover its investment before contacting PJT Partners, which could have subjected some other innocent victim to Mr. Caspersen’s fraud.
After PJT informed the Foundation that it had contacted the U.S Attorney’s Office for the Southern District of New York, the Foundation separately placed a call to the US Attorney to inform them how it initially discovered the fraudulent activities.
The Foundation has since cooperated closely with the U.S. Attorney’s Office for the Southern District of New York and with the SEC, helping to bring this massive fraud to light, protecting future victims and ensuring that the perpetrators of the fraud are brought to justice. The Foundation will continue to aid PJT partners and the government in their investigations, including on efforts to be made whole on the Foundation’s investment for the benefit of important conservation efforts.
PJT Partners terminated Caspersen for cause.
“Since the inception of our firm, an unconditional principle of integrity has been a core value as we build a lasting franchise,” PJT said in a statement. “Our commitment to clients begins and ends with honesty and transparency, and strict adherence to these values is the absolute cornerstone of our Firm.”
Caspersen was released on $5 million bond. As part of the condition for his release, Caspersen must undergo mental-health evaluation and treatment, the court documents show.