Young man accused of heading to Las Vegas to try to recoup hedge fund losses

Larry Neumeister

Wednesday, Oct. 18, 2000 | 9:18 a.m.

NEW YORK - A 23-year-old Delaware man was arrested Tuesday on charges that he mismanaged a private hedge fund, then went to Las Vegas to try to sell assets ranging from a helicopter to a horse to recoup his losses.

Mark Yagalla of Wilmington, an unregistered investment adviser, was charged with mail fraud for allegedly squandering money from at least 20 investors in his hedge fund, Ashbury Capital Partners, L.P.

Prosecutors said in papers filed in U.S. District Court in Manhattan that Yagalla in March 1999 tried to raise $1 billion from investors but had succeeded in getting only $896,000 to that point.

The Securities and Exchange Commission said in a civil complaint also filed in Manhattan that Yagalla eventually raised millions of dollars but could not repay investors more than a fraction of what he had raised.

The SEC said he had boasted to potential investors that he averaged 80 percent annual returns on his investments over the past nine years.

A lawyer for Yagalla did not immediately return a telephone message for comment.

Attempting to make money with the stock market investment, Yagalla instead managed to lose so much by September that the hedge fund account had a negative balance of $271,000, including money he illegally spent on personal expenses, the court documents said.

Prosecutors allege Yagalla began sending phony account statements to investors three to four months ago to cover up the losses from the fund, which was headquartered in Greenville, Del., with a second office in Manhattan.

Last week, prosecutors alleged, Yagalla went to Las Vegas to try to raise money to pay back the hedge fund.

There, he allegedly tried to sell assets including cars, trucks, jewelry, a helicopter, a limousine company, oil wells, nursing homes and an interest in a horse.

In court papers, prosecutors said Yagalla was caught on audiotape from Las Vegas telling a friend that he had made "mistakes," that his expenses had gotten "out of hand," and that he was trying to "salvage" what he could.

The court papers said Yagalla had stopped investing in the stock market in June and had hoped to work out deals with individual investors and avoid going to jail.

If convicted, Yagalla faces a maximum sentence of five years in prison and fines of more than a half million dollars.