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11:53 AM
Phil Albinus
Phil Albinus
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Bitran Father and Son Pay $4.8M SEC Fine, Leave Securities Industry

The once heralded father and son hedge fund GMB Capital Management admit no wrong-doing in feeding Bernard Madoff and faking their profits.

The fraudster doesn't fall far from the tree. Gabriel Bitran and his son Marco Bitran will pay $4.8 million to settle SEC charges that they fabricated profits and lured investors into investments that included Bernie Madoff's fund which was later revealed to be a notorious Ponzi scheme.

"The Bitrans solicited investors by touting an impressive track record and a unique investment strategy," David Bergers, head of the SEC's Boston office, said in a statement. "They lied about both."

The Bitrans claimed that their hedge fund GMB Capital Management had no down years with annualized returns as high as 16.2 percent even as other funds struggled. Reports Reuters: "They told investors the records were based on actual trading using Gabriel Bitran's optimal-pricing models when they were actually based on hypothetical historical investments, according to the order."

Back in 2008, Advanced Trading profiled Marco Bitran about the hedge fund he ran with his father. Although there's no smoking gun in our 2008 piece, Bitran fils did reveal some insights for our reporter, namely:

The firm's technology strategy combines both in-house and external development. "We've outsourced a lot of the programming of the models, but it's been driven mostly by my father's research over the years," Bitran relates. He estimates the GMB Global Alpha Fund's capacity at "probably north of $2 billion."

Moving from a more traditional asset management firm such as Wellington to a hedge fund, Bitran says, he now must be more cognizant of short-term performance. "From one side, we have a very different strategy, which is ... one reason why we've had some success in raising assets so far," he says. "But on the flip side, it takes a little bit longer to explain the strategy, and people are always questioning its validity. So the short-term performance becomes more important."

People are always questioning its validity? Apparently not that much.

If anyone did true due diligence, firms like Madoff's and GMB wouldn't pass the smell test. When a hedge fund is recording 16.2 percent profits and no down years a smart investor would pull their cash and find something safer because this was meant to blow up.

This quote seems almost chilling in hindsight from young Marco:

"[O]ur goal is to build a variety of products around our particular methodology as well. We want to deliver absolute performance gains every calendar year and returns uncorrelated to the market. We've done that so far, and we need to continue doing it."
While Bitran father and son admit no wrong-doing, both men have agreed to be barred from the securities industry.

Phil Albinus is the former editor-in-chief of Advanced Trading. He has nearly two decades of journalism experience and has been covering financial technology and regulation for nine years. Before joining Advanced Trading, he served as editor of Waters, a monthly trade journal ... View Full Bio
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