A movie producer who heads the private equity firm Cyrano Group has been charged with defrauding hedge fund investors of at least $5.8 million that was supposed to be invested in medical-billing businesses.
The U.S. Securities and Exchange Commission said David Bergstein, 54, perpetrated a “highly profitable” fraud with principals of Weston Capital Asset Management, using the money he allegedly stole from investors in two of Weston’s hedge funds to support an extravagant lifestyle.
The alleged fraud involved a $9 million loan from one fund to a Bergstein entity and a swap agreement in which about $17.7 million was transferred to another Bergstein company. In both cases, investors were allegedly told the money would be used to invest in medical-billing businesses.
In addition to being charged in an SEC civil complaint, Bergstein and former Weston general counsel Keith Wellner were arrested Wednesday on parallel criminal charges. Albert Hallac, Weston’s founder, pleaded guilty in January to charges that he schemed to defraud Weston investors.
“The use of elaborate corporate transactions to mask old-fashioned theft of investor monies will not prevent the SEC from enforcing the federal securities laws and protecting investors,” Andrew M. Calamari, director of the SEC’s New York regional office, said in a news release. “Violators will be held to account no matter the artifice used to perpetrate their frauds.”
Bergstein was an executive producer on such movies as “In the Heart of the Sea,” “Before the Devil Knows You’re Dead,” and “The Whole Ten Yards.” Five of his film companies including Capitol Films and ThinkFilm were forced into bankruptcy in 2010.
According to the SEC, Bergstein’s first deal with Hallas and Wellner in 2011 involved an attempt to unwind a “disastrous” investment by a Weston fund in reinsurer Gerova Financial Group. He allegedly misappropriated at least $2.3 million of the loan another Weston fund made to his Arius Libra company and another $3.5 million from the later swap agreement deal.
The SEC said Bergstein used investor funds to pay for personal expenses incurred with an antique watch and jewelry retailer, a firearms dealer, and a bonsai tree nursery.