SEC Settles Visium Charges in Midst of Jacob Gottlieb-led Wind Down


Visium Asset Management continues to wind down its business after one of the largest financial scandals in recent years. The destruction of Visium is the most high-profile closure since the meltdown of SAC Capital in 2013. Three of the hedge fund’s rogue employees were charged by the SEC with insider trading and inflating fund returns.

At its peak, Visium was a dominant hedge fund with 170 employees and offices in New York, London, and San Francisco. Started by Jacob Gottlieb in 2005 and backed with $300 million in seed capital, Visium was well positioned to become a major player in the industry. The fund grew quickly in its last few years, expanding from $4 billion in assets in 2016 to $8 billion in 2016. Some of Visium’s prominent pension fund investors included the New Jersey State Investment Council, the School Employees Retirement System of Ohio, and the Missouri State Employees’ Retirement System.

Visium was not only a new venture for Gottlieb but also for members of his industry network.

Despite a strong founding team and years of strong fund performance, Gottlieb was forced to close Visium as a result of charges brought against wayward employees Stephen Lumiere, Sanjay Valvani, and a third Visium employee, Christopher Plaford. This was an unusual turn of events, as it is rare for a company to close when it and its founder/CEO has not been charged with any wrongdoing. The charges against the three rogue employees were the result of a long investigation triggered by inside whistleblower Jason Thorell.

Whether Thorell participated in any illegal activities is not entirely clear; he received immunity from prosecution from the government in return for his cooperation. Under the SEC Whistleblower Program, Thorell may be financially rewarded for his cooperation as he could be eligible to earn 10 to 30 percent of any money the agency collects above $1 million using his information.

The SEC charges stemmed from allegations that Lumiere and Plaford participated in a scheme to falsely inflate the value of securities held by a hedge fund advised by Visium.

Lumiere, a portfolio manager, was alleged to have used his personal cell phone to solicit and used falsified broker quotes to mismark securities contrary to Visium’s valuation methodology,  resulting in artificially inflated returns and inflated management and performance fees from which he took a share. Lumiere pled not guilty at his trial in 2017 and was handed down a prison sentence of 18 months, $1 million in fines, and three years of supervised release. A relatively lax sentence compared to the 14-year prison term that the prosecution considered more appropriate. U.S. Attorney Joon H. Kim said: “For his greed-driven lies, Lumiere stands a convicted securities fraudster.” Plaford was charged with securities fraud, wire fraud, and conspiracy to which he pleaded guilty and has since been cooperating with investigators.Plaford, a portfolio manager, pleaded guilty in 2016, and is awaiting sentencing.

The charges against portfolio manager Valvani stem from a scheme he  was charged with running with consultant Gordon Johnston to commit insider trading, evading Visium’s policies. Johnston was a senior official at the FDA and aided Valvani in obtaining confidential information from the FDA. Facing up to 85 years in prison and $5 million in fines, four days after he was charged Valvani committed suicide. Johnston pled guilty to the insider trading charges and agreed to pay disgorgement in the amount of $127,000.

After the charges were announced, employees and investors became scared and this compounded the turmoil at Visium. Key employees started leaving and Visium became susceptible to competitors, like Aptigon Capital, which lured away 20 of Visium’s top traders. Gottlieb’s letter to investors at the time made reference to “substantial investor withdrawals” pointing to wide-spread investor non-confidence. The amount investors pulled from the firm was estimated to be more than $3 billion. As a, Gottlieb made the decision to close the company.

“This raises serious questions for financial firms. The rogue employees here evaded the fund’s stringent compliance measures,” said Jack Wiener, a professor of Securities Law at Brooklyn Law School. “How is a firm supposed to protect itself against this behavior? The funds had auditors that did not spot the issues. Visium was a robust, growing $8 billion hedge fund and 200 people lost their jobs.”

Gottlieb himself was never charged and has been cleared of any legal wrongdoing associated with the Visium insider trading scandal. As the only key executive still standing at Visium, Gottlieb continues his role as CIO as the company continues to wind down. In his spare time, Gottlieb maintains an active presence in a number of New York charitable organizations.

While some former Visium executives have continued their investment careers elsewhere, some members of Visium’s leadership team have pursued unrelated interests. Joshua Brown, a Partner and Portfolio Manager at Visium for more than 10 years has become a Senior Vice President at Paulson & Co., a $9 billion dollar hedge fund firm. Ron Belldegrun, a core part of the Visium team, has since founded Consumer Health Ventures (CHV), a healthcare start-up focused on building and investing in Consumer Health companies.

In contrast, the careers of former Visium employees Steven Ku and Neetu Dhaliwal have taken a radical departure from their former financial focus.  Ku, the former COO of Visium, has become an Executive Minister at NextGen Church. As a member of the pastoral team, Ku is involved in finance, administration, and overall management of church operations, and he is currently pursuing an MA in Theology. Dhaliwal was a Senior Analyst at Visium, and her career took a more political direction when she joined Hillary Clinton’s ‘Hillary for America’ campaign in 2016.


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