Summary of Case: A securities class action has been filed against ArrowHead Capital Finance, Ltd. ("Arrowhead") on behalf of all common stock purchasers from Inception of Fund through Present.
The complaint alleges that during September 2008, a federal investigatory task force assembled in the District of Minnesota uncovered a massive fraudulent Ponzi scheme perpetrated by Defendants. Petters and their co-conspirators have been charged with multiple federal felonies and more charges are expected. At present, the total estimate involved in the swindle approaches a staggering $3 billion.
The complaint alleges that none of this was known to Plaintiffs and other investors when they purchased shares in ArrowHead. Indeed, the ArrowHead Offering Memorandum assured investors that the securities ArrowHead purchased would be evaluated on their "merits" and that "criteria" for qualifying inventory would be applied according to the circumstances of each transaction and according to certain "guidelines".
The complaint further alleges that the annual financial statements for ArrowHead were materially false and misleading inasmuch as they grossly overstated and mischaracterized the financial results and condition of the Fund. Among other things, ArrowHead's financial statements, as prepared, approved, and disseminated by Defendants, materially misstated: (i) the fair value of the Fund's investments in the Petters-related notes; (ii) the income earned on the Fund's investments in the Petters-related notes; and (iii) the net asset values of the Fund's shares.
