Highland Park hedge-fund manager guilty in fraud

Gregory Bell, an Illinois hedge fund manager, pleaded guilty to fraud charges over his role in feeding assets to a Ponzi scheme allegedly run by Thomas Petters, founder of Petters Group Worldwide LLC.

The SEC's complaint, filed in U.S. District Court for the District of Minnesota, alleges that Gregory Bell and Lancelot Management LLC invested more than $2 billion in hedge funds assets with Petters and pocketed millions of dollars in fraudulent fees at the expense of investors in the funds.

The SEC's complaint also charges Petters with fraud for perpetrating the massive Ponzi scheme through the sale of notes related to consumer electronics. When Petters's scheme began to unravel, Bell participated in a series of sham transactions to conceal that Petters owed more than $130 million in investor payments on the notes, the agency said.

Bell, founder of Lancelot Investment Management LLC, admitted one count of wire fraud yesterday in St. Paul, Minnesota. He faces as much as 20 years in prison and a fine of $250,000 in addition to restitution under a plea agreement.

"Greg Bell portrayed himself as a helping hand to investors,avidly protecting their funds and verifying the legitimacy of Petters's business. But behind their backs, he was handing over billions of dollars of his clients' money to feed a fraud," Robert Khuzami, director of the SEC's Division of Enforcement, said in a statement.