By Michael Pollick
Published: Saturday, February 28, 2009 at 1:00 a.m.
Last Modified: Saturday, February 28, 2009 at 7:31 a.m.
Former Sarasota hedge fund manager Arthur Nadel faces a deadline if he wishes to avoid a default judgment in the SEC's civil fraud case against him in Tampa federal court.
If not, it might take only a month for the Tampa judge to convict him by default, according to the agency's lead prosecutor in the case, Scott Masel.
Nadel is incarcerated under federal custody in New York, where he faces criminal fraud charges.
He is represented there by a high-profile criminal attorney team from Tampa, Barry Cohen and Todd Foster. But he has never had an attorney put in an appearance in the Tampa civil fraud case filed by the SEC on Jan. 21.
In a Feb. 20 filing with the Tampa court, Masel warned that he would seek a default.
Once the SEC enters its official notice, said Masel, the agency would ask the court for a default judgment. The process could be completed in 30 days.
"It would be unusual because we are seeking monetary judgments that are pretty big," said Masel. "We don't know how big yet, but as you can see in the complaint it was presented that their accounts were worth over $300 million. Somewhere there is a lot of money missing."
Nadel disappeared on Jan. 14, leaving his wife, Peg Nadel, and business associate Neil Moody to explain to investors that they had suddenly discovered that most of the $300 million-plus they had stated to be under management was gone.
Nadel claimed to be trading securities for six private mutual funds run by Scoop Management, all of which claimed unusually high annual returns. The SEC alleges that the returns were fraudulent and that the firm was simply paying redemptions out of money coming in from new investors, and pocketing hefty and unwarranted management fees along the way.
With Nadel still missing, the SEC filed its civil fraud case against him and his investment management corporations on Jan. 21.
The Tampa federal court immediately granted a request by the SEC to appoint a receiver to take control of the assets of the Nadels and the companies they ran. The receivership now takes in not only the Sarasota-based financial business but also the Venice Jet Center, which is owned by the Nadels, and some real estate holdings.
Nadel reappeared at federal offices in Tampa on Jan. 27 and was arrested on what had been sealed criminal fraud charges. He was later transferred to New York City, where he faces trial in federal criminal court.
In New York, Nadel could conceivably bail out for $5 million, an amount set earlier this week. However, that seems unlikely under the current terms, according to Foster.
The New York judge said that Nadel must post $1 million of the bond in cash.