The Serious Fraud Office (SFO) is being asked to explain why it dropped a fraud investigation against a hedge fund manager who was later fined £3m by the Financial Services Authority (FSA) for deceiving clients.
The Times reports City-based law firm Eversheds has questioned why the SFO ended its eight-month probe into Alberto Micalizzi, former chief executive of London-based Dynamic Decisions Capital Management (DDCM), in 2010.
Micalizzi was yesterday hit with the largest ever fine against an individual for market abuse - £3m - and handed a City ban by the FSA.
According to the regulator, between 1 October 2008 and 31 December 2008, the master fund managed by DDCM suffered "catastrophic" losses totaling some $390m, approximately 85% of its value.
Micalizzi was then said to have lied to investors about the true position of the fund to conceal the losses.
The FSA said he then purchased a bond which was not a genuine financial instrument, in an attempt to create artifical gains for the fund.
By providing false and misleading information, the FSA said he deliberately concealed the true value of the fund from one new investor who subsequently invested $41.8m on 1 December 2008.
Micalizzi has since protested his innocence and said he would lodge an appeal with the Upper Tribunal.
The SFO defended its handling of the case: "There was insufficient evidence at the time and there was not a reasonable likelihood then that sufficient and relevant evidence would materialise for a realistic prospect of conviction," a spokesman told The Times.
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