GERMANY – Investors in the Phoenix Kapitaldienst GmbH, the funds of hedge funds firm under investigation for accounting irregularities, have pulled together to protect their interests.
The group is being represented by Tübingen-based law firm Steinhübel & von Buttlar, which specialises in bank, stock exchange and management law. It is not clear whether institutional investors are among the 30,000 who had invested money with Phoenix Kapitaldienst.
Last Thursday, Frankfurt-based Phoenix, which has run the alternative investment Phoenix Managed Account since 1992, was instructed by regulator BaFin to stop trading.
The order came after the firm’s new management discovered what BaFin calls “irregularities” concerning an account with a London broker, who is supposed to have made financial transitions on behalf of Phoenix.
Prompted by BaFin, Phoenix’s management contacted the public prosecutor's office.
BaFin said: “There is a danger that a three-figure million damage developed for the investors.” But it did not elaborate further.
Meanwhile, the Frankfurt am Main district court opened provisional insolvency procedure over Phoenix’ assets, at BaFin’s request.
“The court ordered that instructions of Phoenix are effective only with agreement of the provisional insolvency manager,” BaFin said. The criminal police are also involved with the case.
“The irregularities remained undiscovered up to the beginning of March 2005. The account documents existing with Phoenix, which feigned assets of more than €600m, were obviously manipulated,” BaFin said.
Phoenix was not available for comment. A recorded message at its office refers to BaFin’s orders to cease trading and provides a hot-line numbered set up by the regulator for the benefit of investors.
UK hedge fund group Man said there have been no irregularities at its end. It said it was made aware last week by Phoenix of discrepancies in Phoenix's internal reconciliation of certain of its accounts.
“It appears that certain accounts in the books of Phoenix do not exist at any company at the Man Group,” it said.
“We have undertaken a detailed review of our own records, and are satisfied that there are no irregularities of any kind at any Man Group company.
“The Man Group has incurred no loss, has no financial exposure to Phoenix, and all Man client and proprietary funds are fully accounted for.”