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Man Financial accused of PAAMCo fraud

Man Financial, the US-based brokerage arm of the British investment firm Man Group is to face allegations of fraud following the collapse of the $230 million Philadelphia Alternative Asset Management (PAAMCo) hedge fund.

The allegations were brought as part of a lawsuit filed by court-appointed receivers to PAAMCo, which claims that Man Financial "enabled and facilitated wrongful conduct" in its role as broker to the hedge fund.

Both the brokers as a whole and seven of its employees are to face charges that include fraud and negligence.

The PAAMCo hedge fund was shut down by the US Commodities Futures Trading Commission (CFTC) last year, with the former president of the hedge fund, Paul Eustace, receiving a lifetime trading ban and agreeing to pay money to former investors.

The receivers claim that Man Financial was complicit in Mr Eustace's illegal activities, including moving $140 million worth of losing trades to secret accounts.

Man Financial reacted to the charges by vowing to "vigorously defend itself", claiming that not only were the allegations "outrageous and spurious", but that those individually named in the lawsuit were administrative staff only peripherally involved in the matter.

PAAMCo reportedly lost investors over $147 million before it was eventually shut down in June 2005.