3 Degrees Asset Management, a hedge fund with $250m under management, was asked by Singapore??s central bank to shutter its operations following allegations that founder Moe Ibrahim diverted assets.
3 Degrees is trying to overturn a decision by the Monetary Authority of Singapore (MAS) and the finance minister to withdraw its exempt fund manager status effective Nov. 9 and ask it to wind down, according to a lawsuit filed with the Singapore High Court this month. A closed hearing is scheduled for Oct. 20.
The MAS probed the Singapore-based manager after one of its funds sued Indonesian-born Agus Anwar in 2008 to recover at least $40 million in debt. Anwar then claimed that Ibrahim diverted $6.7 million from the fund to 3 Degrees, which is wholly owned by Ibrahim. 3 Degrees, which focuses on distressed debt, denied the allegations in its lawsuit.
Even if there was such a transaction, it was neither ??illegal or improper,? 3 Degrees said in its court filings. The hedge fund manager said a fine would have been an appropriate punishment.
The capital markets regulator decided that 3 Degrees and Ibrahim weren??t fit and proper persons to be in the regulated activity of fund management, according to the hedge fund??s lawsuit. The finance minister affirmed the decision to withdraw the fund??s exempt status.
Fund managers with fewer than 30 qualified investors are exempted from licensing and business conduct requirements under Singapore??s Securities and Futures Act. 3 Degrees has stopped accepting new clients, according to the lawsuit.
Allowing the withdrawal of 3 Degrees?? exempt status would leave the fund with no bargaining power to liquidate assets and would ??create a bad precedent for the future,? it said in court papers.
3 Degrees called the decision ??draconian? and said it was based on ??illogical, irrational and unreasonable? statements and assumptions, according to its lawsuit.
??Other hedge fund managers would face the same risk and may become over-cautious for fear of having their own exemptions withdrawn,? Ibrahim said in the filings.
??The authority would appear to be sending out a signal that all it takes are strong allegations from a desperate, debt- ridden party without conclusive evidence to corroborate these allegations or a disgruntled employee for a withdrawal of an exemption or license to occur,? he said.
The case is 3 Degrees Asset Management Pte v Attorney General and Monetary Authority of Singapore OS874/2011 in the Singapore High Court.
