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Godman was US hedge fund promoter

Last updated: 03 May, 2010
Chandan Nandy, Bangalore, May 2, DHNS: 1:34 IST

Dirty secret out

Self-styled godman Nithyananda’s hedge fund that operated in the United States was named Nithyananda Investment Fund I, LP (limited partnership), according to investigations by Deccan Herald.

Another entity that managed the fund was called Nithyananda Capital Management LLC, or a limited liability company. The Fund was incorporated in November 2007 with its business address as 113 N, Econolockhatchee Trail, Orlando, Florida.

Deccan Herald is in possession of irrefutable documentary evidence that show Nithyananda promoted the Fund, though it was managed by his trusted aide Rajesh Krishnan and a Taiwanese national Shuping Lin. In the United States Securities Exchange Commission’s (SEC) Form D, filled out as a notice for sale of securities, Nithyananda’s name figures as one of three promoters of the Fund.

The same form describes the Fund as “a private investment company making investments in and trading listed securities, over the counter securities and public offerings”. Under Rule 506 of the US Securities and Exchange Commission, the Fund had exemption to “raise an unlimited amount of money”.

As someone who ran declared charitable trusts based in Bangalore, Nithyananda’s direct involvement in the hedge fund is shown in documents that state that by September 30, 2008, the Fund traded securities to the tune of $1.55 million. The Fund’s objective was to trade on the stock market for an “indefinite” period and for “indefinite” securities sale. The minimum investment that was accepted from any individual partner was $50,000.

Documents available with Deccan Herald show nine “accredited” or “sophisticated” investors — those who have “sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment”. Besides these, securities offerings were sold to one person who did not qualify as an accredited investor.

In one sale of securities, according to a Form D document signed and dated on February 2, 2009, two accredited investors purchased securities worth $125,000 and the sole non-accredited investor purchased securities to the tune of $50,000. The “gross adjusted proceeds to the issuer” (the Fund) was $89,137.50, after deductions of “salaries and fees, printing and entity formation”.

Responding to Deccan Herald’s enquiries, Raj Krishnan said in an email: “There was never any involvement of the Fund with the operations of the Foundation/Non-Profit in (the) US or anywhere else. I never took money from the non-profits and never would have.”

The bank accounts and earnings of Nithyananda’s two charitable trusts - Dhyana Peeta Charitable Trust and Nithyananda Dhyanapeetam - are now under the scrutiny of the Enforcement Directorate (ED).

The ED is also probing his personal account in a private Indian bank where the total deposit is about Rs 32 crore to establish whether the godman, now in judicial custody at the Ramanagara district jail, has violated FERA and FEMA provisions.

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