New York-based hedge fund advisor Phillip Falcone and his firm Harbinger Capital Partners funding LightSquared, the company reponsible for the controversial planned nationwide mobile Broadband network that was blocked by the FCC in February of last year, settled this week with the Securities and Exchange Commission (SEC) for an admission of wrongdoing, debarrment from the securities industry for five years, and $18 million in penalties.
The SEC filed misconduct enforcement actions in June 2012 for Falcone's use of $113 million in fund assets to pay his personal taxes, secretive preference given to certain customer redemtpion requests over that of other investors, and the improper "short squeezing" of bonds issued by a Canadian manufacturing company.
The settlement has yet to be approved by the U.S. District Court for the Southern District of New York. The penalties for Falcone include $6,507,574 in disgorgement, $1,013,140 in prejudgement interest, and a $4 million penalty fine. The Harbinger companies are required to pay a $6.5 million penalty fine. Falcone may reapply after his five years of debarrment, and the bar will allow him to assist in the liquidation of his hedge funds under the supervision of an independent third party monitor. His debarrment prohibits him from association with any broker, dealer, investment advisor, municipal securities dealer, municipal adviser, transfer agent, or nationally recognized statistical rating organization.
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