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14 Jun 2007

Specialized China Fund Launch

Hong Kong and London based fund of hedge funds manager KGR Capital announced that it has launched the KGR Capital China Absolute Return Fund focused specifically on hedge funds invested in greater China.

The Cayman Islands domiciled hedge fund of funds has a minimum investment of $100,000. The initial strategy is to invest in about 10 locally invested hedge funds. The fund's manager is targeting returns of about 20% annually over the longer term and is expecting volatility of about 10%.

Mark White, chief executive of KGR Capital Europe said in a statement, "Early indications are that our selected managers have been able to maintain positive returns this month despite the recent sharp sell-off in the A-share market."

Hong Kong-based KGR Capital specializes in Asia strategies and was formed in 2002 by John Knox, Nick George and Christopher Rampton, who worked together in Asia at Jardine Fleming and JPMorgan. The firm launched its first specialist Asian fund of funds, the KGR Capital Asia Pacific Absolute Return Fund, in August 2003. KGR Capital employs 15 professionals at offices in Hong Kong and London.

Hedge Fund Manager Faces Prison Time

In an investigation conducted by the FBI, the US Postal Service, and the SEC, hedge fund manager Joseph Ferona now faces prison time after pleading guilty to a fraud charge. His sentencing is scheduled for Aug. 24, Ferona disappeared in 2005 but was arrested earlier this year in Austin, Texas.

From October 2003 through May 2005, Ferona devised a scheme to defraud investors of money by false pretenses by soliciting individuals to invest funds into a “hedge fund” known as Global Prosperity Fund. Ferona purported to operate this fund through Castle Rock Trading Company, based in Castle Rock and Franktown, Colorado.

However, he was not registered with the State of Colorado. As part of the scheme, Ferona made fraudulent representations to investors, including that the fund realized annual returns or profits in excess of 40%, that returns for 2005 were projected as reaching 50 percent, and that the fund earned double digit returns during both good and bad market conditions.

Ferona allegedly concealed massive trading loses by generating and distributing false and fictitious quarterly and monthly investor account statements, falsely depicting each investors’ fund balance as appreciating based on the falsely reported returns.

“There is no such thing as a ‘guaranteed’ or ‘insured’ investment,” said U.S. Attorney Troy Eid. “Investments that promise unrealistic returns with no risk are virtually always fraudulent.”

Ferona now faces 23 counts of mail fraud, each carrying a penalty of up to 20 years imprisonment, and up to a $250,000 fine. He faces five counts of wire fraud, each carrying up to 20 years in federal prison, and a $250,000 fine. He also faces 9 counts of money laundering, with four of the counts carrying up to 20 years imprisonment, and a $500,000 fine, and 5 of the counts carrying up to 10 years imprisonment, and up to a $250,000 fine.