German hedge fund manager Florian Homm, who had been a fugitive for more than five years, was arrested in Italy on U.S. fraud charges, according to a statement from the U.S. attorney's office in Los Angeles.
Homm, 53, the founder and chief investment officer of Absolute Capital Management Holdings Ltd, is accused of orchestrating a market manipulation scheme to artificially improve the performance of his funds, a fraud that led to at least $200 million in losses to investors. He was arrested Friday at the Uffizi Gallery art museum in Florence.
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An attorney for Homm could not immediately be reached for comment.
Absolute Capital, based in the Cayman Islands, managed nine hedge funds from 2004 to September 2007.
The criminal complaint filed in U.S. District Court in Los Angeles alleges that Homm directed the hedge funds to buy billions of shares of U.S.-based penny stocks and trade them among themselves to inflate their prices and the funds' asset values while generating additional fees for Homm and Absolute Capital.
Stock purchases were made through Hunter World Markets Inc, a broker-dealer in Los Angeles co-owned by Homm.
Homm also allegedly dumped tens of millions of dollars' worth of his own shares in Absolute Capital before resigning from the firm in the middle of the night on September 18, 2007, causing at least $200 million in losses to investors in the hedge funds. The scheme netted Homm and accomplices more than $53 million, according to the U.S. attorney.
In November 2012, Homm published a book titled "Rogue Financier: The Adventures of an Estranged Capitalist."
He faces four felony charges: conspiracy to commit wire fraud, wire fraud, conspiracy to commit securities fraud, and securities fraud. Homm was arrested by Italian authorities after the United States submitted a request for a provisional arrest with officials in Rome.
The U.S. Securities and Exchange Commission two years ago also filed a civil lawsuit in Los Angeles federal court against Homm and four other defendants accusing them of stock manipulation to inflate the value of Absolute Capital.
(Reporting By Susan Kelly in Chicago; editing by Gunna Dickson)