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[singapore-times]

Singapore central bank asks hedge fund 3 Degrees to close

The Monetary Authority of Singapore (MAS) has asked Singapore hedge fund manager 3 Degrees Asset Management to shut down its operations, following allegations that its founder Moe Ibrahim diverted assets, according to a Bloomberg report.

3 Degrees is trying to overturn a decision by the MAS and the finance minister to withdraw its exempt fund manager status effective November 9 and ask it to wind down, according to a lawsuit filed with the Singapore High Court this month. A closed hearing was held on Thursday, but it was not immediately known what the outcome was.

The MAS probed the Singapore-based manager after one of its funds sued Indonesian-born Agus Anwar in 2008 to recover at least US$40 million in debt. Mr. Anwar then claimed that Mr. Ibrahim diverted US$6.7 million from the fund to 3 Degrees, which is wholly owned by Mr. Ibrahim. 3 Degrees, which focuses on distressed debt, denied the allegations in its lawsuit. The firm manages four funds with assets of US$215 million, including a fund called the Asian Debt fund, according to Reuters.

Even if there was such a transaction, it was neither “illegal or improper,” 3 Degrees said in its court filings. The hedge fund manager said a fine would have been an appropriate punishment.

Mr. Ibrahim had declined to comment. The fund has also asked the court to prevent the announcement of the regulator’s decision, according to the lawsuit.

Rising Stars

Mr. Ibrahim was named one of the 20 Rising Stars of Hedge Funds by trade publication Institutional Investor in 2007.

“It is inappropriate for MAS to comment on this matter at this point in time,” the Monetary Authority was quoted as saying in the report.

The regulator decided that 3 Degrees and Mr. Ibrahim weren’t fit and proper persons to be in the regulated activity of fund management, according to the hedge fund’s lawsuit. The finance minister affirmed the decision to withdraw the fund’s exempt status.

Hedge funds have come under increased scrutiny after the collapse of Lehman Brothers Holdings Inc in 2008, while volatile trading conditions have made it harder for them to raise capital. Assets managed by Asian hedge funds fell 23% to US$135 billion in August from a peak of US$176 billion in 2007, according to independent data provider and research house Eurekahedge Pte Ltd.

Exempt status

Fund managers with fewer than 30 qualified investors are exempted from licensing and business conduct requirements under Singapore’s Securities and Futures Act. 3 Degrees has stopped accepting new clients, according to the lawsuit.

Allowing the withdrawal of 3 Degrees’ exempt status would leave the fund with no bargaining power to liquidate assets and would “create a bad precedent for the future,” it said in court papers.

3 Degrees called the decision “draconian” and said it was based on “illogical, irrational and unreasonable” statements and assumptions, according to its lawsuit.

“Other hedge fund managers would face the same risk and may become over-cautious for fear of having their own exemptions withdrawn,” Mr. Ibrahim said in the filings.

“The authority would appear to be sending out a signal that all it takes are strong allegations from a desperate, debt- ridden party without conclusive evidence to corroborate these allegations or a disgruntled employee for a withdrawal of an exemption or license to occur,” he added.

[singapore-times]

Singapore orders hedge fund 3 Degrees to shut down on claims of fraud

On Tuesday, Singapore’s Monetary Authority (MAS) ordered 3 Degrees Asset Management Pte, a private independent asset management firm based on the island state, to shut down its operations on allegations that its founder Moe Ibrahim had diverted assets. MAS is Singapore's central bank and supervises the banking, insurance, securities and futures industries.

According to a report from Bloomberg, the regulator and the Finance Minister gave 3 Degrees until November 29th to wind down its operations and withdrew its exempt fund manager status. The hedge fund manager is appealing the order and an October 20th closed door hearing was set to discuss the petition.

3 Degrees, which manages $215m in assets, was investigated by the MAS after Ibrahim was accused by investor Agus Anwar of diverting at least $3.7m (or $6.7m according to Bloomberg) from the fund’s assets. The allegation surfaced after one of 3 Degrees’ funds sued Anwar in 2008 to recover an estimated $40m in debt.

Ibrahim denies the accusations and said in court filings the transaction – if it had really occurred – would have been neither “illegal nor improper.”

Prominent former bank owner Indonesia-born Agus Anwar was in March this year declared bankrupt by the High Court in Singapore, reported The Straits Times. The debt-ridden businessman, who reportedly owed 23 creditors a total of $103.3m, had been trying to stave off bankruptcy proceedings by putting forward repayment proposals to his creditors.

3 Degrees is an established player in Asian credit markets; the firm announced the launch of the Credit Opportunities Fund with initial assets of $27.3m in Jan-10. In March-09, it also launched ADF Prime Ltd, a credit opportunities fund that invest primarily in the performing debt obligations of Asian companies that have been mispriced as a result of the credit crunch. 3 Degree’s flagship, the Asian Distressed Fund, was up 8% YTD as at end-June according to the firm’s website.