Mr. Lumiere, a former brother-in-law to Mr. Gottlieb, was accused of mismarking securities with Mr. Plaford.
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In January, Mr. Lumiere was convicted on securities fraud charges of mismarking assets held in a Visium portfolio.
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Plaford pleaded guilty on June 9 to charges related to the mismarking and has agreed to cooperate with authorities.
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The U.S. Securities and Exchange Commission filed a civil lawsuit in Manhattan federal court accusing Christopher Plaford of fraud over his alleged trading and the alleged mismarking.
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The other concerned a trader mismarking illiquid positions and unauthorized proprietary trading by Citigroup Global Markets Inc (CGMI) from 2013 to 2016, the Securities and Exchange Commission said.
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Prosecutors said Lumiere, 46, and others engaged in the mismarking conspiracy while overseeing the Visium Credit Opportunities Fund, which in 2012 reported peak net assets of $471.5 million.
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At trial, prosecutors are likely to call as a cooperating witnesses Plaford, who pleaded guilty in June in connection with the mismarking scheme and the separate insider trading matter.
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The mismarking was even more serious in Premium's flagship mortgage credit hedge fund, which was mismarked by 24 percent, and dated back to at least January 2014, the prosecutors added.
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Just last month, the five-time major winner Phil Mickelson suggested that players on the regular tour are getting away with mismarking their balls on the greens for their own gain.
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From 2011 to 2013, prosecutors said, Lumiere and others schemed to defraud investors by mismarking the value of securities held by the bond fund, causing its net asset value to be overstated.
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Prosecutors said the mismarking caused the fund's net asset value to be overstated often by tens of millions of dollars each month, resulting in higher payments to Visium and bigger bonuses for Lumiere.
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From 2011 to 2013, prosecutors said, Lumiere and others, including portfolio manager Christopher Plaford, schemed to defraud investors by mismarking the value of securities held by the fund, which invested in debt issued by healthcare companies.
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Mr. Thorell, according to Bloomberg, helped obtain sham quotes used to inflate the price of the securities in the Visium credit fund that were an important part of the mismarking, so he was in the middle of any violations.
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Perhaps one of the most noteworthy CFTC cases detailing its stance on personal liability was announced last fall when a trader at German banking giant Deutsche Bank received a lifetime bar and $350,000 fine related to charges of internally mismarking values of swap positions.
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Mutual fund set their net asset value based on daily pricing using the end of the day price, which can introduce inaccuracies. ETFs do not have this precise risk as the holdings are typically reported transparently, although large bid-ask spreads and premiums or discounts to NAV can occur. Mismarking the value of underlying securities can be a fraudulent activity which inflates returns and sets future investors up for losses.
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Ben-Artzi claims that after modelling came up with "economically unfeasible" results, Deutsche accounted for the gap option first with a simple 15% "haircut" on the trades (described as inadequate by another employee in 2006) and then in 2008 by a $1–2bn reserve for the credit correlation desk designed to cover all risks, not just the gap option. In October 2008 they stopped modelling the gap option and just bought S&P; put options to guard against further market disruption, but one of the whistleblowers has described this as an inappropriate hedge. A model from Ben-Artzi's previous job at Goldman Sachs suggested that the gap option was worth about 8% of the value of the trades, worth $10.4bn. Simpson claims that traders were not simply understating the gap option but actively mismarking the value of their trades.
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