Hedge Fund Manager Headquartered in World Trade Center Arrested for Fraud
The founder of a hedge fund based in Lower Manhattan has been arrested by the FBI and charged by federal prosecutors with securities fraud and wire fraud. On September 9, federal agents executed a warrant at the offices of the hedge fund Oraclum Capital, located on the 85th floor of One World Trade Center, taking into custody chief executive officer Vuk Vukovic (right, in a social media image), who also serves as the chief investment officer of a subsidiary, the Orca Bason Fund.
In a criminal complaint filed with the U.S. District Court in Lower Manhattan, FBI agent Babatunde Adediran alleges that Mr. Vukovic and Oraclum kept two sets of books. One, which was shown to prospective investors, indicated stellar returns and large amounts of money under management. But a second, internal accounting (produced by an independent administrator) documented losses or more modest earnings, along with smaller allocations from investors.
For example, Mr. Adediran alleges, the statements for the year 2023 that were circulated to investors show returns of 19.05 percent, and almost $5 million under management. But the internal documents indicated losses of 22.46 percent, and only $2.7 million under management. For 2024, the statements shown to people considering entrusting their money to Mr. Vukovic and Oraclum claimed a return of 38.44 percent, with managed assets of $18 million. In fact, according to the internal books, Oraclum earned 16.39 percent that year, with just $12 million under management. (For comparison, the S&P returned 26.3 percent in 2023 and 25.02 percent in 2024.) “I have learned that the year-to-date return listed on each of the Oraclum-produced statements is higher than the listed returns on all of Administrator-produced statements, sometimes by more than ten percentage points,” Mr. Adediran said in court documents.
According to Mr. Adediran, when FBI agents appeared at Oraclum’s offices on September 9 and confronted Mr. Vukovic with the false financial statements sent to investors via email, “Vukovic admitted that the brokerage statements… were false and did not accurately reflect the assets or returns of the fund. Although Vukovic denied himself sending the falsified statements… [he] admitted that he is among the individuals who has access to and utilizes the Investor Relations Email Address. Vukovic could name only one other person who he thought might have access to the Email Address.”
Mr. Vukovic launched the Orca Bason Fund in 2022, claiming that, while trading for his own portfolio, he had earned returns of 71 percent in 2022 (a year during which the S&P 500 lost more than 18 percent), and 160 percent for 2021 (when the S&P returned 29 percent).
“How come our returns are so large?” Mr. Vukovic asked rhetorically in his announcement, before going on to explain, “Two reasons. First, positive skew. We apply a weekly trading strategy that limits losses each week (max of five percent of the total portfolio) and lets the profits run. The bulk of our annual returns comes from a few great weeks, where our weekly returns are over eight percent (this means that our options positions delivered 100 percent or 200 percent winners).”
“The second reason is the weekly compounding effect,” the announcement added. “Each week we take profits (or incur losses) and reinvest them the following week. No unrealized profits here.”
In other summaries, he said, “we apply a simple strategy of trading weekly options (Friday expiry), with a max loss of two percent in any given week,” and boasted of “using wisdom of crowds and a network analysis of social media bubbles to predict where markets will end up.”
In blog posts, Mr. Vukovic pointed with pride to his earlier work “as an anti-corruption advocate in Croatia, based on my PhD research on local government corruption,” where he “successfully influenced the Croatian Parliament to pass a budget transparency law in 2021, requiring all units of local government to publish all of their spending online, with receipts, proofs of purchases, and signed contracts.”
On Tuesday, September 8, Mr. Vukovic posted, “One last thing: Friday is the 25th anniversary of the 9/11 attacks. If you’re feeling particularly patriotic that day, the market is usually bullish on 9/11 after 2001. Good luck!”
The next morning, federal agents in blue windbreakers with the letters “FBI” stenciled on the back appeared at the Oraclum offices, and took Mr. Vukovic into custody. If convicted on the charges of securities and wire fraud, he is facing a possible maximum of 40 years in prison.
Mr. Vukovic’s court-appointed lawyer, Amy Gallicchio, did not respond to a request for comment.