The SEC also sued Peter Jenson, Harbinger’s ex-chief operating officer, for aiding and supporting the misappropriation scheme.
The US watchdog accused Falcone for using fund assets to pay his taxes, conducted an illegal "short squeeze" to manipulate bond prices, secretly favoured certain customers at the expense of others.
The regulator slammed Falcone for fraudulently obtaining $113.2m from a hedge fund that he advised and misappropriated the proceeds to pay his personal taxes.
It also slammed the fund manager for its illicit act of buying equity securities in a public offering, after disposing short the same security during a restricted period.
SEC’s Division of Enforcement Director Robert Khuzami said, "Clients and market participants alike were victimised as Falcone unscrupulously used fund assets to pay his personal taxes, manipulated the market for certain bonds, favoured some clients at the expense of others, and violated trading rules intended to prohibit manipulative short sales."
The SEC filed actions in US District Court for the Southern District of New York against Falcone, Jenson, and Harbinger, and, in connection with the illegal trading scheme, separately instituted and settled administrative and cease-and-desist proceedings against Harbinger.
The Commission has sought disgorgement of ill-gotten gains, prejudgement interest, and civil money penalties from Falcone and Harbinger, and also requested to prohibit Falcone from serving as an officer and director of any public company.
