Paradigm Global

I'm rather late to the fair with his story, but let me summarize the facts as the interested portion of the world now knows them, thanks to the estimable work of blogger John Hempton. Then I'll make a brief comment on a possible bit of political fall-out.

Paradigm Global, a fund of funds (i.e. a "feeder fund" for first-order hedge funds) is under the ownership and control of two members of the Vice President's family, his son and brother -- Hunter and James Biden.

Paradigm Global shares office space on Fifth Avenue with a hedge fund, Ponta Negra. They also used the same phone number and marketer.

This matters because on April 27, the SEC obtained a court order to freeze the assets of Ponta Negra, alleging that its founder, Franscesco Rusciano, has been misrepresenting his fund's monthly and yearly performance results.

Specifically, the SEC alleges that Rusciano claimed his fund earned total annual returns of 42.99 percent for 2007, 24.85 percent for 2008, and 6.14 percent for the first two months of 2009, whereas in fact the assets of the fund "suffered substantial trading losses in 2007, had modest profits in 2008, and again sustained losses in 2009."

Hempton, who was on the case before the SEC was (or at least before it told the rest of the world about it) has posted on his blog a marketing document for Porta Negra, that identified Citigroup as its prime broker. Hempton says, "I wrote to citigroup several times – and spoke to senior people in their government relations area and told Citigroup the entire story. I believe that Citigroup did not react appropriately to a fraud committed in their name."


A lawyer for Paradigm, Marc LoPresti, has tried to play down any connection between Paradigm (and the Bidens) on the one hand and Ponta Negra on the other, saying simply "they were subtenants." As to the common marketer, Jeff Schneider, he "did some marketing for Paradigm over the last couple of years [and] introduced us to Ponte Negra, and we had some available office space. That's 100% the extent of the relationship."

Felix Salmon was initially rather skeptical about the significance of any Ponta Negra/Biden link, calling the subtenancy a "rather tenuous" connection. But as you can see here, Salmon is no longer so skeptical, and says he is "looking into" it.

Fall-out?

A Biden family connection with a crooked hedge fund could, at the least, complicate this administration's efforts to make scape goats out of the supposedly unscrupulous hedge funds who refused to keep Chrysler out of bankruptcy by swallowing its losses as their own. That bit of scapegoating is an absurd policy anyway, and it richly deserves to be complicated.