Visium Asset Management

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Visium Asset Management LP
TypePrivate
IndustryInvestment management
Founded2005
FounderJacob Gottlieb
HeadquartersNew York City, New York, U.S.
ProductsHedge funds
AUM$8 billion (2016)
Number of employees
170 (2016)

Visium Asset Management LP was an American multi-strategy hedge fund. It began as a healthcare-focused hedge fund, founded in 2005 by Jacob Gottlieb. Visium managed investment funds with about $8 billion of assets under management, and had 170 employees, at its peak in 2016. That year three of the company's traders were indicted by United States federal authorities for securities fraud. One of the accused employees killed himself days after he was indicted. Visium subsequently liquidated several of its funds, and wound down operations.

Founder[]

Jacob Gottlieb was born in Brooklyn, New York, around 1971–1972.[1][2] He graduated with a Bachelor of Arts in economics from Brown University and went on to receive an M.D. from New York University School of Medicine.[3] While originally seeking to become a surgeon, according to Gottlieb, he decided instead to work on Wall Street after graduating college.[3]

Having previously managed healthcare related portfolios for several investment companies, Jacob Gottlieb started Visium Asset Management LP in 2005.[3][4] Initially starting with Visium Balanced Fund, Gottlieb would explain in a 2012 interview with Institutional Investor that he hoped to have the company later offer enough diversified products to eventually challenge the largest hedge fund managers in the industry.[1][5]

In 2018, he would begin another firm known as Altium Capital as its first CEO.[6] A 2019 article by The Wall Street Journal reported Gottlieb hired reputation management company Status Labs to challenge negative news coverage about him and Visium while also helping him raise money for Altium Capital.[7]

Business[]

Visium Asset Management oversaw numerous funds throughout its existence. In 2015, Visium "managed five hedge funds and a mutual fund" while also reportedly trying to raise $500 million in capital for the creation of a private equity fund, according to Bloomberg News.[8] At the company's most successful point in 2016, they had at least $8 billion in assets under management.[2][9]

Name Start End Fate Notes Ref.
Visium Balanced Fund 2005 2016 Liquidated[a] The firm's flagship healthcare equity fund. It would later serve as a model for Altium Capital. [2][6]
Visium Global Fund 2009 2016 Sold Bought by AllianceBernstein. [9]
Visium Institutional Partners Fund 2016 Liquidated [9][10]
Visium Equity Alpha Fund 2016 Liquidated [9][10]
Visium Equity Alpha UCITS Fund 2015 2016 Liquidated A diversified United States-focused equity fund with long and short positions. [9][11]
Visium Credit Opportunities Fund 2009 2013 Liquidated Investigated in March 2016 over valuation of securities. [12][13]
Visium Event Driven Fund 2013 2015 Liquidated [12][14]

Visium Asset Management started as a family business. Until 2010, Gottlieb's father had a desk within the firm's New York office and, on occasion, informally advised the company on accounting matters.[2] In 2009, Jacob Gottlieb hired his brother Mark as chief compliance officer in a move regarded by Bloomberg News as a "potential conflict of interest". Additionally, Bloomberg reported that portfolio manager Stefan Lumiere "was hired in 2007, two years after his sister Alexandra became engaged to [Jacob] Gottlieb."[2]

Despite his public commitment to "the highest ethical conduct [for Visium employees]", Gottlieb directly owned 25,703 shares of Intercept Pharmaceuticals despite the company having 5.2% stake as well. This caused at least one investor complaint, and the company received accusations of double standards from several employees.[2]

Winding down and closure[]

Investigation of rogue employees for fraud[]

A former junior trader with the firm, Jason Thorell, told the U.S. Securities and Exchange Commission in 2013, according to Reuters, that "Visium employees routinely sought sham quotes from brokers to justify inflated values for debt securities, and deviated from prices set by third-parties on a magnitude beyond what was usual."[15] With the hope of receiving a payout under the SEC’s whistleblower program which can award whistleblowers up to 30% of any money the SEC collects in a matter, Thorell cooperated with federal investigators and secretly recorded over 200 hours of conversations over two years with individuals at the firm.[5][15][16][17]

In March 2016, Visium notified shareholders that Visium was being investigated by the United States Justice Department and the SEC regarding the company's actions in regard to their Credit Opportunities Fund which had been shut down in 2013.[12] The investigation led to large customer withdrawals.[18] Later in June, three traders at the firm were charged with securities fraud.[2][19] Sanjay Valvani and Chris Plaford were indicted for insider trading while Plaford and Stefan Lumiere were accused of inflating the value of the Credit Opportunities Fund.[9]

United States v. Valvani; suicide[]

In 2016, portfolio manager Sanjay Valvani and two others were charged with insider trading by federal prosecutor Preet Bharara, the United States Attorney for the Southern District of New York.[20][21][22] Valvani was also charged with engaging in securities fraud and wire fraud from 2005 through 2011, and passing material nonpublic information to another trader who traded on that information.[23] While managing the firm's flagship healthcare fund, according to federal authorities, "Valvani specifically made about $25 million by trading on non-public information about pending drug approvals from the Food and Drug Administration".[2][b][24] Vivani had worked for the company since its inception in 2005, and reportedly managed as much as $2 billion in funds.[22] Visium placed Valvani on leave after it was announced that he was under investigation.[23]

Valvani turned himself in to authorities on June 15, 2016, and was arrested.[25][23][2][26] He pled not guilty to five counts.[23][2] He was freed on bail in the amount of $5 million, secured by his home.[26] If convicted, Valvani faced up to 85 years in prison.[27]

Valvani's two alleged co-conspirators pled guilty, however.[23][28] The two admitted their participation with Valvani in the illegal scheme, and agreed to cooperate in the case against Valvani.[23][28][29][30]

On June 20, 2016, five days after he was indicted, Valvani was found dead in an apparent suicide.[23][2][21][24] Due to his death, the government's court case against him had to be dropped.[22]

In 2019, attorney Irving Picard, who had led the claw back of funds in the illegal Bernie Madoff securities fraud scheme, filed a complaint on behalf of Visium against Valvani's estate seeking the return of over $100 million by the estate, due to Valvani's alleged illegal conduct and breach of fiduciary duty.[21][c][31] Even if the company wins the case, the Valvani family will be provided for by a $10 million insurance trust, according to the suit.[21]

United States v. Lumiere[]

Two years after his sister's 2005 marriage to Gottlieb, Stefan Lumiere joined Visium to manage the firm's Credit Opportunities Fund which held assets consisting of distressed debt.[5] He was accused of fraudulently overvaluing the assets of the fund, and was convicted of securities fraud after his case went to trial.[7][2]

Liquidation[]

In the wake of the controversy, Jacob Gottlieb wound down the company.[6][10] Following negotiations with the Securities and Exchange Commission in 2018, the company disgorged $10 million to regulators, and closed the activities of the firm.[32][33] The firm began liquidation two years earlier, selling its primary investment fund to AllianceBernstein.[34] As of August 19, 2019, the firm was operating under the name VA Management LP.[31]

Notes[]

  1. ^ 3–5% of the fund was held back for potential payment of the firm's liabilities.
  2. ^ Bloomberg News reported a $32 million figure from federal authorities.[24][22]
  3. ^ The company specifically requested a return of payments it previously made to Valvani between 2007 and 2016; he had been paid more than $30 million in a single year.

Sources[]

  1. ^ Jump up to: a b Rose-Smith, Imogen (August 7, 2012). "Visium's Founder in Major Makeover". Institutional Investor. Retrieved December 28, 2019.
  2. ^ Jump up to: a b c d e f g h i j k l Foxman, Simone; Porzecanski, Katia; Burton, Katherine (July 20, 2016). "Inside the High-Profile Downfall of a $8 Billion Hedge Fund". Bloomberg News. Retrieved December 23, 2019.
  3. ^ Jump up to: a b c "About". Jacob Gottlieb. Retrieved December 27, 2019.
  4. ^ "Visium Asset Management: The Fall of a Hedge Fund and What It Means for Jacob Gottlieb". MarketWatch (Press release). Finance News Wire. May 8, 2018. Retrieved December 23, 2019.
  5. ^ Jump up to: a b c Berthelsen, Christian (January 9, 2017). "Visium Star Witness Taped Gottlieb While Working Undercover". Bloomberg News. Retrieved December 28, 2019.
  6. ^ Jump up to: a b c Levy, Rachael (September 7, 2018). "Founder of Hedge Fund Snared In Scandal Plots a Return". Wall Street Journal. Dow Jones & Company. Retrieved December 24, 2019 – via ProQuest.
  7. ^ Jump up to: a b Levy, Rachael (December 13, 2019). "How the 1% Scrubs Its Image Online". Wall Street Journal. Dow Jones & Company. Retrieved December 23, 2019 – via ProQuest.
  8. ^ Porzecanski, Katia; Parmar, Hema (July 19, 2016). "Visium Asset Management to Fire 33 People as Funds Shutter". Bloomberg News. Retrieved December 27, 2019.
  9. ^ Jump up to: a b c d e f Foxman, Simone; Porzecanski, Katia (June 17, 2016). "Visium to Shut Four Remaining Hedge Funds as Manager Charged". Bloomberg News. Retrieved December 27, 2019.
  10. ^ Jump up to: a b c Stevenson, Alexandra (June 17, 2016). "Visium to Sell and Liquidate Funds After Insider Trading Charges". The New York Times. Retrieved December 27, 2019.
  11. ^ "Visium Asset Management Launches Long/Short U.S. Equities UCITS Fund". Business Wire (Press release). New York. May 5, 2015. Retrieved December 27, 2019.
  12. ^ Jump up to: a b c Stevenson, Alexandra (March 7, 2016). "Visium Hedge Fund Being Investigated by Justice Dept. and S.E.C." The New York Times. Retrieved December 27, 2019.
  13. ^ Porzecanski, Katia; Burton, Katherine (March 7, 2016). "Visium Being Probed by U.S. Over Valuation in Credit Fund". Bloomberg News. Retrieved December 27, 2019.
  14. ^ "Visium Asset Management Launches its First Mutual Fund". PRNewswire (Press release). New York. August 19, 2013. Retrieved February 21, 2020.
  15. ^ Jump up to: a b Raymond, Nate (January 12, 2017). "Ex-Visium trader tells New York jury how he turned whistleblower". Reuters. New York. Retrieved December 24, 2019.
  16. ^ "Visium Hedge Fund Informant Recorded 125-Plus Conversations".
  17. ^ "FBI informant recorded calls at Visium hedge fund". The Salt Lake Tribune.
  18. ^ "Financial Times". www.ft.com.
  19. ^ Stevenson, Alexandra (June 15, 2016). "Visium Hedge Fund Managers Charged With Insider Trading". The New York Times. Retrieved December 23, 2019.
  20. ^ Preet Bharara. "U.S. v. Valvani; Sealed Indictment," justice.gov.
  21. ^ Jump up to: a b c d Boniello, Kathianne (August 17, 2019). "Hedge fund suing Sanjay Valvani's widow to recover the millions he earned at firm". The New York Post.
  22. ^ Jump up to: a b c d Kishan, Saijel; Porzecanski, Katia; Dolmetsch, Chris (June 21, 2016). "Visium's Valvani Found Dead in Apparent Suicide Amid Charges". Bloomberg News. Retrieved December 27, 2019.
  23. ^ Jump up to: a b c d e f g "Visium's Sanjay Valvani found dead in apparent suicide after insider trading charge". Metals News. June 21, 2016.
  24. ^ Jump up to: a b c Vardi, Nathan (June 21, 2016). "Hedge Fund Manager Found Dead Of Apparent Suicide Amid Insider Trading Charges". Forbes. Retrieved December 27, 2019.
  25. ^ Knab, Matthias (June 22, 2016). "Visium hedge fund manager Sanjay Valvani found dead". Opalesque.
  26. ^ Jump up to: a b "Sanjay Valvani, hedge fund manager charged with insider trading, found dead". The Guardian. June 21, 2016.
  27. ^ "NYC medical examiner: Hedge fund manager killed himself". The Seattle Times.
  28. ^ Jump up to: a b "Sanjay Valvani and Gordon Johnston (Release No. LR-23688; November 14, 2016); SEC Announces Settlement with Former Government Official in Insider Trading Case". www.sec.gov. November 14, 2016.
  29. ^ Nate Raymond and Svea Herbst-Bayliss (June 21, 2016). "Hedge fund exec Sanjay Valvani in apparent suicide after insider trading charges". Australian Financial Review.
  30. ^ Larry Neumeister (June 21, 2016). "Hedge fund manager dies of apparent suicide following arrest". AP News.
  31. ^ Jump up to: a b Levy, Rachael (August 19, 2019). "Visium Sues Widow of Portfolio Manager Who Died by Suicide". Wall Street Journal. Retrieved December 28, 2019.
  32. ^ Shazar, Jon (May 9, 2018). "Defunct Hedge Fund Ends Two-Year Negotiation With Feds, Allowed To Go Out Of Business". Dealbreaker. Retrieved December 24, 2019.
  33. ^ Mullins, Brody (May 8, 2018). "Hedge Fund Visium to Pay $10 Million to Settle Insider-Trading Case". Wall Street Journal. Washington. Retrieved December 24, 2019 – via ProQuest.
  34. ^ Krouse, Sarah; Copeland, Rob (June 17, 2016). "Visium Liquidates Fund, Sells Another to AllianceBernstein". Wall Street Journal. Retrieved December 23, 2019 – via ProQuest.

Further reading[]

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