Bloomberg reports that Falcone, the 49-year-old founder of Harbinger Capital Partners LLC, may be sued by the regulator as soon as this week over claims he improperly borrowed client money to pay his taxes, according to two people familiar with the matter.
He may also face claims that he gave preferential treatment to Goldman Sachs Group Inc. (GS), an investor in his fund, and manipulated markets when trading bonds of MAAX Holdings Inc., said the people, who asked not to be identified because the matter isn’t public.
'Any allegations by the SEC of improprieties by Mr. Falcone or Harbinger are neither supported by the facts or the law', said Matthew Dontzin, an attorney for Falcone. 'Should a lawsuit be brought, it will be contested vigorously'.
The SEC action is the second blow in less than two months for Falcone, a former Harvard hockey center who built a $26 billion hedge fund by 2008 with a successful bet against subprime mortgages. Having suffered $23 billion in losses and withdrawals from the peak, Falcone is now fighting to keep control of his empire. LightSquared Inc., Harbinger Capital’s biggest investment, filed for bankruptcy in May.
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