Visium Asset Management

Visium Asset Management LP was an American multi-strategy hedge fund. It began as a healthcare-focused hedge fund, founded in 2005 by Jacob Gottlieb. Visium controlled investment funds with about $8 billion of assets under management and had 170 employees at its peak in 2016. That year, three of the company's traders were indicted by United States federal authorities for securities fraud. One of the accused employees killed himself days after he was indicted. Visium subsequently liquidated several of its funds and wound down operations.

Visium Asset Management LP
TypePrivate
IndustryInvestment management
Founded2005
FounderJacob Gottlieb
Defunct2016
FateLiquidation
HeadquartersNew York City, New York, U.S.
ProductsHedge funds
AUM$8 billion (2016)
Number of employees
170 (2016)

Jacob Gottlieb

Jacob Gottlieb was born in Brooklyn, New York, in 1971.[1][2] He graduated with a Bachelor of Arts in economics from Brown University and went on to receive an M.D. from New York University School of Medicine.[3] While originally seeking to become a surgeon, according to Gottlieb, he decided instead to work on Wall Street after graduating medical school.[3]

Having previously managed healthcare related portfolios for several investment companies, Jacob Gottlieb started Visium Asset Management LP in 2005.[3][4] Initially starting with Visium Balanced Fund, Gottlieb would explain in a 2012 interview with Institutional Investor that he hoped to have the company later offer enough diversified products to eventually challenge the largest hedge fund managers in the industry.[1][5]

In 2018, he would begin another firm known as Altium Capital as its first CEO.[6] A 2019 article by The Wall Street Journal reported Gottlieb hired reputation management company Status Labs to challenge negative news coverage about him and Visium while also helping him raise money for Altium Capital.[7]

Business

Visium Asset Management oversaw numerous funds throughout its existence. In 2015, Visium "managed five hedge funds and a mutual fund" while also reportedly trying to raise $500 million in capital for the creation of a private equity fund, according to Bloomberg News.[8] At the company's most successful point in 2016, they had at least $8 billion in assets under management.[2][9]

Name Start End Fate Notes Ref.
Visium Balanced Fund 2005 2016 Liquidated[lower-alpha 1] The firm's flagship healthcare equity fund. It would later serve as a model for Altium Capital. [2][6]
Visium Global Fund 2009 2016 Sold Bought by AllianceBernstein. [9]
Visium Institutional Partners Fund 2010 2016 Liquidated Large-cap healthcare equity fund. [9][10]
Visium Equity Alpha Fund 2011 2016 Liquidated A diversified United States-focused equity fund with long and short positions. [9][10]
Visium Equity Alpha UCITS Fund 2015 2016 Liquidated A diversified United States-focused equity fund with long and short positions. [9][11]
Visium Credit Opportunities Fund 2009 2013 Liquidated Investigated in March 2016 over valuation of securities. [12][13]
Visium Event Driven Fund 2013 2015 Liquidated An equity fund with long and short positions focused on Event-Driven investing. [12][14]

Visium Asset Management started as a family business. Until 2010, Gottlieb's father had a desk within the firm's New York office and, on occasion, informally advised the company on accounting matters.[2] Jacob Gottlieb's brother Mark worked at Visium in various roles, in a move regarded by Bloomberg News as a "potential conflict of interest". Additionally, Bloomberg reported that portfolio manager Stefan Lumiere "was hired in 2007, two years after his sister Alexandra became engaged to [Jacob] Gottlieb."[2]

Despite his public commitment to "the highest ethical conduct [for Visium employees]", Gottlieb directly owned 25,703 pre-IPO shares of Intercept Pharmaceuticals despite the company having 5.2% stake as well. This caused at least one investor complaint, and the company received accusations of double standards from several employees.[2]

Winding down and closure

Investigation for fraud

A former trader with the firm, Jason Thorell, told the U.S. Securities and Exchange Commission in 2013, according to Reuters, that "Visium employees routinely sought sham quotes from brokers to justify inflated values for debt securities, and deviated from prices set by third-parties on a magnitude beyond what was usual."[15] Thorell would cooperate with federal investigators who asked him to secretly record individuals at the firm including Gottlieb's brother-in-law Lumiere.[5][15] He cooperated with federal investigators and secretly recorded over 200 hours of conversations with individuals at the firm over two years.[16]

In March 2016, Visium notified shareholders that Visium was being investigated by the United States Department of Justice and the U.S. Securities and Exchange Commission regarding the company's actions in regard to their Credit Opportunities Fund which had been shut down in 2013.[12] The investigation led to large customer withdrawals.[17] Later in June, three traders at the firm were charged with securities fraud.[2][18] Sanjay Valvani and Chris Plaford were indicted for insider trading while Plaford and Stefan Lumiere were accused of inflating the value of the Credit Opportunities Fund.[9]

The Securities and Exchange Commission barred former portfolio manager, Christopher Plaford, from the securities industry after charges that he inflated asset prices under a fraudulent scheme at Visium Asset Management.[19] In 2016, Plaford pleaded guilty to securities fraud and was permanently banned from the securities industry.

Later, Steven Ku, Visium's former Chief Financial Officer, agreed to be barred from the securities industry for one year and pay $100,000 to settle the agency's allegations that he failed to supervise portfolio managers Christopher Plaford and Stefan Lumiere. [20][21]

United States v. Valvani; suicide

In 2016, portfolio manager Sanjay Valvani and two others were charged with insider trading by federal prosecutor Preet Bharara, the United States Attorney for the Southern District of New York.[22][17] While managing the firm's flagship healthcare fund, according to federal authorities, "Valvani specifically made about $25 million by trading on non-public information about pending drug approvals from the Food and Drug Administration".[2][23][lower-alpha 2] Valvani had worked for the company since its inception in 2005, and reportedly managed as much as $2 billion in funds.[22]

Valvani turned himself in to authorities on June 15, 2016, and was arrested.[2][24] He pled not guilty to five counts.[2] He was freed on bail in the amount of $5 million, secured by his home.[24] If convicted, Valvani would have faced up to 85 years in prison.[25]

Valvani's two alleged co-conspirators pled guilty, however.[17] The two admitted their participation with Valvani in the illegal scheme, and agreed to cooperate in the case against Valvani.[26][27]

On June 20, 2016, five days after he was indicted, Valvani was found dead in an apparent suicide.[2][23] Due to his death, the government's court case against him had to be dropped.[22]

In 2019, Visium filed a complaint against Sanjay Valvani's widow and estate seeking over $100 million be returned,[lower-alpha 3] due to Valvani's alleged illegal conduct and breach of fiduciary duty.[28] In 2020, the suit was dismissed by the New York Supreme Court citing the expiration of the statute of limitations.[29]

United States v. Lumiere

Two years after his sister's 2005 marriage to Gottlieb, Stefan Lumiere joined Visium, ultimately working under Chris Plaford in the firm's Credit Opportunities Fund which held assets consisting of distressed debt.[5] He was accused of fraudulently overvaluing the assets of the fund, and was convicted of securities fraud after his case went to trial.[7][2][30] Lumiere was sentenced to 18 months in prison followed by three years’ supervised release and a $1 million fine.[31]

Liquidation

In the wake of the controversy, Jacob Gottlieb wound down the company he originally founded.[6][10] Following negotiations with the Securities and Exchange Commission in 2018, the company forfeited $10.2 million to regulators in exchange for being able to shut down.[32][33] The firm had begun liquidation two years earlier, selling the Visium Global Fund to AllianceBernstein.[34] As of August 19, 2019, the firm was operating under the name VA Management LP.[28]

Notes
  1. 3–5% of the fund was held back for potential payment of the firm's liabilities.
  2. Bloomberg News reported a $32 million figure from federal authorities.[23][22]
  3. The company specifically requested a return of payments it previously made to Valvani between 2007 and 2016; he had been paid more than $30 million in a single year.

Sources
  1. Rose-Smith, Imogen (August 7, 2012). "Visium's Founder in Major Makeover". Institutional Investor. Retrieved December 28, 2019.
  2. Foxman, Simone; Porzecanski, Katia; Burton, Katherine (July 20, 2016). "Inside the High-Profile Downfall of a $8 Billion Hedge Fund". Bloomberg News. Retrieved December 23, 2019.
  3. "About". Jacob Gottlieb. Archived from the original on November 1, 2019. Retrieved December 27, 2019.
  4. "Visium Asset Management: The Fall of a Hedge Fund and What It Means for Jacob Gottlieb". MarketWatch (Press release). Finance News Wire. May 8, 2018. Retrieved December 23, 2019.
  5. Berthelsen, Christian (January 9, 2017). "Visium Star Witness Taped Gottlieb While Working Undercover". Bloomberg News. EBSCOhost 140573975. Retrieved December 28, 2019 – via EBSCOhost.
  6. Levy, Rachael (September 7, 2018). "Founder of Hedge Fund Snared In Scandal Plots a Return". Wall Street Journal. Dow Jones & Company. Retrieved December 24, 2019 – via ProQuest.
  7. Levy, Rachael (December 13, 2019). "How the 1% Scrubs Its Image Online". Wall Street Journal. Dow Jones & Company. Retrieved December 23, 2019 – via ProQuest.
  8. Porzecanski, Katia; Parmar, Hema (July 19, 2016). "Visium Asset Management to Fire 33 People as Funds Shutter". Bloomberg News. Retrieved December 27, 2019.
  9. Foxman, Simone; Porzecanski, Katia (June 17, 2016). "Visium to Shut Four Remaining Hedge Funds as Manager Charged". Bloomberg News. Retrieved December 27, 2019.
  10. Stevenson, Alexandra (June 17, 2016). "Visium to Sell and Liquidate Funds After Insider Trading Charges". The New York Times. Retrieved December 27, 2019.
  11. "Visium Asset Management Launches Long/Short U.S. Equities UCITS Fund". Business Wire (Press release). New York. May 5, 2015. Retrieved December 27, 2019.
  12. Stevenson, Alexandra (March 7, 2016). "Visium Hedge Fund Being Investigated by Justice Dept. and S.E.C." The New York Times. Retrieved December 27, 2019.
  13. Porzecanski, Katia; Burton, Katherine (March 7, 2016). "Visium Being Probed by U.S. Over Valuation in Credit Fund". Bloomberg News. Retrieved December 27, 2019.
  14. "Visium Asset Management Launches its First Mutual Fund". PRNewswire (Press release). New York. August 19, 2013. Retrieved February 21, 2020.
  15. Raymond, Nate (January 12, 2017). "Ex-Visium trader tells New York jury how he turned whistleblower". Reuters. New York. Retrieved December 24, 2019.
  16. Berthelsen, Christian (August 30, 2016). "FBI informant recorded calls at Visium hedge fund". The Salt Lake Tribune. Bloomberg News.
  17. Fortado, Lindsay (June 15, 2016). "Current and former Visium portfolio managers charged with fraud". Financial Times. London. ProQuest 1804443984 – via ProQuest.
  18. Stevenson, Alexandra (June 15, 2016). "Visium Hedge Fund Managers Charged With Insider Trading". The New York Times. Retrieved December 23, 2019.
  19. "SEC Bans Former Hedge Fund Manager for Inflating Asset Prices". Institutional Investor. Retrieved September 20, 2022.
  20. "Visium will pay $10 million over former traders' misconduct". Pensions & Investments. May 8, 2018. Retrieved September 20, 2022.
  21. "Security and Exchange Commission - Steven Ku" (PDF). Security and Exchange Commission.
  22. Kishan, Saijel; Porzecanski, Katia; Dolmetsch, Chris (June 21, 2016). "Visium's Valvani Found Dead in Apparent Suicide Amid Charges". Bloomberg News. Retrieved December 27, 2019.
  23. Vardi, Nathan (June 21, 2016). "Hedge Fund Manager Found Dead Of Apparent Suicide Amid Insider Trading Charges". Forbes. Retrieved December 27, 2019.
  24. "Sanjay Valvani, hedge fund manager charged with insider trading, found dead". The Guardian. June 21, 2016.
  25. "NYC medical examiner: Hedge fund manager killed himself". The Seattle Times. New York. AP. June 22, 2016.
  26. Raymond, Nate; Herbst-Bayliss, Svea (June 21, 2016). "Hedge fund exec Sanjay Valvani in apparent suicide after insider trading charges". Australian Financial Review.
  27. Neumeister, Larry (June 21, 2016). "Hedge fund manager dies of apparent suicide following arrest". AP News.
  28. Levy, Rachael (August 19, 2019). "Visium Sues Widow of Portfolio Manager Who Died by Suicide". Wall Street Journal. Retrieved December 28, 2019 – via ProQuest.
  29. Levy, Rachael (May 21, 2020). "Judge Tosses Hedge Fund Visium's Lawsuit Against Portfolio Manager's Widow". Wall Street Journal. New York, NY: Dow Jones & Company. ProQuest 2405320536. Retrieved May 7, 2023 – via ProQuest.
  30. "Ex-Visium fund manager convicted of fraud by Manhattan jury". Reuters. January 19, 2017.
  31. Levy, Rachael (September 7, 2018). "Founder of Hedge Fund Snared In Scandal Plots a Return". Wall Street Journal. ISSN 0099-9660. Retrieved September 20, 2022.
  32. Shazar, Jon (May 9, 2018). "Defunct Hedge Fund Ends Two-Year Negotiation With Feds, Allowed To Go Out Of Business". Dealbreaker. Retrieved December 24, 2019.
  33. Mullins, Brody (May 8, 2018). "Hedge Fund Visium to Pay $10 Million to Settle Insider-Trading Case". Wall Street Journal. Washington. Retrieved December 24, 2019 – via ProQuest.
  34. Krouse, Sarah; Copeland, Rob (June 17, 2016). "Visium Liquidates Fund, Sells Another to AllianceBernstein". Wall Street Journal. Retrieved December 23, 2019 – via ProQuest.

Further reading
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