Fugitive Hedge Fund Manager “Florid” Florian Homm finally Caught Five Years Later

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News this week that, literally at 6ft 7”, larger than life German hedge fund manager Florian Homm was caught in an art gallery in Florence, provided me with an opportunity to look back over this curious case of fraud…

The co-founder of what was (rather inappropriately named) Absolute Capital Management Holdings faces criminal charges that may, if convicted, put him in jail for 75 years in the US. In other words, he will die in jail.

The 53 year-old German financier may not be as well known as the likes of John Paulson or Ray Dalio, but he was once one of the top names in the hedge fund industry as the chief investment officer of Absolute Capital Management, a company he co-founded with Sean Ewing (no relation to JR!!).

Absolute Capital was a long/short hedge fund which focused on European equities and at the peak of its existence had AUM north of $3 billion and was even listed on the London AIM market. In the years leading up to the Great Financial Crisis, Homm gained popularity, making hefty profits for his investors and was in fact named Hedge Fund of the Year by the magazine Alternative Investment News.

Homm was also known as the man who saved football team Borussia Dortmund from bankruptcy as he injected his own money in the German club.

When it appeared that everything was working like a charm, Sean Ewing (CEO and chairman) decided in July 2007 to resign from Absolute, claiming that he wanted to spend more time with his family. Later in September, Homm also presented a resignation letter to the company’s management in which he attributed his departure and in his own words to – “a different investment and management philosophy from the current and prior management”. It was apparent that Homm was having difficulty with the company’s new managers – a situation that was most likely intentionally caused by him as later developments will illustrate…

In just a matter of days following his resignation, Homm packed his belongings and flew off in his private jet with his friend Georgio and over half a million dollars in cash to “destination unknown”… Amazingly, during his vanishing act years, he actually wrote a book that was published last year: Rogue Financier: The Adventures of an Estranged Capitalist (now on my to buy list!). Last year he met with journalists to promote his book but the meet was carefully crafted to avoid him being caught.

Just before he departed, Homm divorced his wife, leaving her with £18 million worth in Absolute Capital shares. Unluckily for her, those shares were worth almost nothing after he left…

Homm’s divorce, departure from Germany and leaving his friends and family behind was all for a reason. It later turned out that Homm had invested $500 million of Absolute Capital’s fund assets in very illiquid and speculative shares that are lightly traded and lightly regulated in the US known as pink sheet stocks.

Now, investing in highly risky stocks is not a criminal offence, although if against the funds mandate is certainly an actionable one, but according to one lawsuit, what Homm had been doing was actually manipulating the prices of these stocks. Reason? Homm also owned those shares in his own private portfolio and so he was basically enriching himself at the cost of his hedge fund investors.

Homm is being sued for $200 million in losses and he is personally said to have , along with other implivated parties, accumulated $53 million from those trades.

And so, we have potentially another individual to add to our rogue traders gallery! A man who was able to fool everyone for a while and who then fled and hid for five years, probably in Colombia, as referred to in his book. For an ex basketball player and of considerable height, visiting the Uffizi Gallery in Florence to quench his art thirst and hoping to go unnoticed was a step too far..!

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