The US Securities and Exchange Commission (SEC) has confirmed that it has filed a lawsuit in federal court this week, charging hedge fund billionaire Philip A Falcone – owner of the ill-fated open access Long Term Evolution (LTE) start-up LightSquared – with market manipulation, giving preferential treatment to several big clients, and borrowing cash from his Harbinger Capital venture to pay personal expenses. Robert Khuzami, director of the SEC’s Division of Enforcement, commented: ‘Today’s charges read like the final exam in a graduate school course in how to operate a hedge fund unlawfully. Clients and market participants alike were victimised as Falcone unscrupulously used fund assets to pay his personal taxes, manipulated the market for certain bonds, favoured some clients at the expense of others, and violated trading rules intended to prohibit manipulative short sales’. Falcone and his lawyers have said that he will fight the charges, but did not elaborate.
The lawsuit comes just one month after LightSquared filed for Chapter 11 bankruptcy. As previously reported by TeleGeography’s CommsUpdate, in February this year the Federal Communications Commission (FCC) declared that LightSquared’s use of non-traditional spectrum in the 1.4GHz and 1.6GHz bands interfered with GPS satellite navigation devices and aircraft flight safety equipment. Subsequent months have seen the stricken company beset with myriad financial and legal problems.