The US Securities & Exchange Commission (SEC) has thanked the Bermuda Monetary Authority (BMA) for its role in helping to uncover an alleged multimillion dollar fraud by a New York hedge fund portfolio manager.The SEC filed a complaint against Michael Balboa, the former portfolio manager of the now defunct Millennium Global Emerging Credit Fund and managing director of the fund’s investment advisor Millennium Global Investors Ltd, and Gilles De Charsonville, a partner and foreign associate of BCP Securities LLC, with the US District Court for the Southern District of New York on Thursday.The pair were charged on the same day with engaging in a fraudulent scheme to overvalue the reported returns and net asset value of the fund, which at its peak in October 2008 had reported assets of $844 million.The SEC’s complaint accuses Balboa of scheming with two European-based brokers including Mr De Charsonville and a UK-based broker to inflate the fund’s reported monthly returns and net asset value by manipulating its supposedly independent valuation process.Separately, the US Attorney’s Office for the Southern District of New York has announced the arrest of Balboa and the simultaneous filing of a criminal action against him.In a statement Preet Bharara, US Attorney for the Southern District of New York, said: “As alleged, Michael Balboa, along with his co-conspirators, manipulated the valuation process at his former hedge fund to make it appear financially stronger than it really was and for his own personal gain. In so doing, he harmed the fund and deceived its investors.”Balboa is charged with one count of conspiracy to commit securities fraud and wire fraud, one count of securities fraud and one count of wire fraud. The conspiracy count carries a maximum sentence of five years in prison, and the substantive counts each carry a maximum sentence of 20 years in prison.According to the SEC complaint, from at least January to October 2008, Balboa surreptitiously provided De Charsonville and the other broker with fictional prices for two of the fund’s illiquid securities holdings for them to pass on to the fund’s outside valuation agent GlobeOp Financial Securities Ltd and its auditor Deloitte & Touche (Bermuda) Ltd.The scheme caused the fund to drastically overvalue these securities holdings by as much as $163 million in August 2008, which in turn allowed the fund to report inflated and falsely-positive monthly returns, alleged the SEC.The SEC claimed that by overstating the fund’s returns and overall net asset value, Balboa was able to attract at least $410 million in new investments, deter about $230 million in eligible redemptions, and generate millions of dollars in inflated management and performance fees.The SEC’s investigation, which continues, was conducted by Bill Conway, Brian Fitzpatrick, and Alison Conn of the New York Regional Office, with Nancy Brown is leading its litigation effort.“The SEC acknowledges the assistance and cooperation of the US Attorney, US Postal Inspection Service, UK Financial Services Authority, Bermuda Monetary Authority, Comisión Nacional del Mercado de Valores, Guernsey Financial Services Authority, and Nigeria Securities and Exchange Commission,” the SEC said in a statement released on Thursday.The Millennium Global Emerging Credit Master Fund Ltd and its feeder fund the Millennium Global Emerging Credit Fund Ltd petitioned the Supreme Court of Bermuda for voluntary liquidation and were placed under the control of three court-appointed joint provisional liquidators in October 2008.In September the US Bankruptcy Court for the Southern District of New York entered an order recognising the Bermuda liquidation proceedings as foreign main proceedings pursuant to Chapter 15 of the US Bankruptcy Code.The BMA did not respond for requests for comment by presstime.