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By   /   August 14, 2014  /   No Comments

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Former MIT dean, Gabriel Bitran. (photo: ss.mit.com)

Former MIT dean, Gabriel Bitran. (photo: ss.mit.com)

An ex-MIT business school dean pleaded guilty to running a fraudulent hedge fund scheme along with his son, according to a report in the Boston Globe.

Gabriel Bitran, 69, a former deputy dean at the Sloan School of Business at the prestigious university, and professor for 35 years, pled guilty along with his son, Marco, to operating the scam.

From 2005 until 2011, the Bitrans promised investors that their money would be invested using Gabriel Bitran’s complex trading model.  Bitran used his high-stature position at MIT to help convince investors in the model’s efficacy.

In truth, according to to the indictment against father and son, investor funds — as much as $500 million — were invested in other funds, including millions with disgraced Ponzi schemer Bernard Madoff.

The Bitrans’ hedge fund scheme was essentially a classic Ponzi scheme in which older investors were paid off with newer investors’ money.  The 2008-9 crash brought a run on investors wanting their principal back.  This the time when Ponzi schemes collapse.

Marco Bitran held a Harvard MBA, and ran one of the investment firms involved in the hedge fund scheme.  The Bitrans told investors during recruitment that returns ran between 16% and 23%, according to a report at Money.cnn.com.

Prosecutors allege the Bitrans lost more than $140 million of investor funds.

An email used as evidence from father, Gabriel, to son, Marco, read: “A person with the experience and knowledge of the financial sector anda veteran professor of MIT should not have engaged in this type of behavior.

In 2012, the Bitrans were barred from the securities industry, and agreed to pay $4.8 million in fines

The Bitrans face 2-5 years in prison, and $290 in restitution, according to a SEC press statement.  No sentencing date has been sent.






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