How to Get Your Assets Frozen

What happens when regulators find out that a hedge fund that says it manages $1 billion actually only manages $466 million? They ask to see its books, of course.

And what happens when that hedge fund refuses to give regulators a peek under its hood? Just ask Lake Shore Asset Management.

The Chicago-based hedge fund had its assets frozen Thursday by a U.S. District Court after the Commodity Futures Trading Commission alleged that the fund overstated its holdings, Bloomberg News reports.

The judge granted the C.F.T.C.'s request to freeze the fund's money, of which it can locate only $228 million. In its complaint, the C.F.T.C. accused the fund of delivering inconsistent statements about its activity and refusing to share documents.

The fund is a commodity-pool operator, a group that aggregates money and invests it in futures and options on commodities, which is why it falls under the purview of the C.F.T.C.

Lake Shore Asset Management is no fly-by-night operation, which makes the allegations all the more egregious. According to Bloomberg, on of its directors is Laurence Rosenberg, a man who knows a thing or two about trading futures.

Rosenberg was a director of the Chicago Mercantile Exchange from 1970 to 1993. He was its chairman or vice chairman between 1974 and 1988. He also acted as policy advisor and legislative liaison for the futures exchange during his tenure.

Ironically, the firm's parent company issued a press release on June 12 announcing a new website for its funds:

"The Lake Shore Group of Companies today announced the launch of a new website, www.lakeshorefunds.com, meant to provide high quality, transparent client communications. Integral to the new site is the availability of real-time performance data for each of the company's eight investment funds, presented in an easy to digest graphical format."

Two days later, the firm barred the C.F.T.C. from seeing its books.

by Megan Barnett