Gerova investors sue over alleged reverse 'pump and dump' scheme

FRIDAY, DECEMBER 30: A lawsuit has been filed in Superior Court of California on behalf of Noble Investment Fund Limited claiming millions of dollars in investment losses in Gerova Financial Group.

The suit, filed by Gross Law, claims an alleged “short and distort,” or “reverse pump and dump,” scheme that had the purpose and effect of artificially depressing the share price of Gerova, “ultimately destroying the company as an operating entity”.

Gerova used to be a Bermuda company with several subsidiaries registered here, but is no longer registered with the BMA. Gerova was also involved with Argus Group Holdings in Northstar Group Holdings Ltd.

The suit names Keith Dalrymple, Victoria Dalrymple and Dalrymple Finance amongst the defendants and Scott Hintz, Daniel Ivandjiiski and Pason Piccin among the co-conspirators.

The complaint alleges 1) Intentional Interference with prospective economic advangate; 2) Negligent interference with prospective economic advantage; 3) Unfair business practices; and 4) Violations of the California Corporations Code.

The lawsuit mentions the Northstar investment. Gerova owned 38 per cent of the company with voting rights for 40 per cent and held a 10 per cent proxy with other shareholders.

Earlier this month Argus reported a $3.9 million loss for the six months ending September 2011.

$11 million

The main reason for the loss was the investment related provision of $11 million “which stems from the uncertainty surrounding the ultimate collectability of Argus’ investment in Northstar”.

Allison Hill, Argus CEO, said in a December 19 press release with regard to their financials, “This result, while disappointing, is viewed as a turning point marking the end of challenging legacy issues in the investment arena.

“The balance sheet now faces substantially less exposure to risks arising from non-core investments.”

Argus declined to comment on the lawsuit.

Earlier this year in a Bermuda Sun article Argus said it was not worried about accusations against Gerova. The company said: “Argus invests, via tracking stock, in a different class of shares to that owned by Gerova. The value to Argus of their beneficial interest in the tracking stock is not directly affected by the performance of the tracking stock which relates to the share class owned by Gerova.”

Keith Dalrymple declined to comment.