In case you missed it, something unusual happened last week: a dishonest money manager went to prison.
Former hedge fund manager Larry Goldfarb was sentenced to 14 months in prison for pocketing $6 million from side pocket investments and diverting money for his personal use. I write about Goldfarb in my book (available for preorder here!). He was a prominent figure in the Bay Area investment world. To his credit, he gave a lot of money to charity and worthy causes. Unfortunately, a lot of it wasn’t necessarily his to give. He was busted a couple of years ago and promised to repay his investors the money he took from his fund. But Larry couldn’t stop being Larry and now he’s going to federal prison because of it.
According to the federal prosecutor in charge of the case, “instead of paying the agreed upon restitution and disgorgement, Mr. Goldfarb spent hundreds of thousands of dollars on various personal indulgences, including Golden State Warriors season tickets, private air travel, and vacations.”
Mr. Goldfarb is a poster child for many people on Wall Street and in investment management: smart, personable, and shamelessly unethical. He is another example of why Wall Street, far more than corporate America, needs tighter regulation. But the truly disturbing part of Goldfarb’s career might not be the illegal stuff he was prosecuted for–it’s the legal activity one of his former employers practiced right out in the open.