Sentinel missing $505M, says NFA

Sep 5, 2007 @ 10:36 am

By Darla Mercado

Sentinel Management Group Inc., the troubled Chicago-based money manager, is missing $505 million from its accounts, according to published reports.

An investigation by the National Futures Association, the self-regulatory group for the futures industry, uncovered the shortfall.

The discovery may raise questions on a settlement Sentinel made last month involving Citadel Investment Group and some of Sentinel’s creditors, The Financial Times reported.

Last month, the Securities and Exchange Commission accused Sentinel of defrauding clients and misappropriating their assets, alleging that the money manager mixed up clients’ funds in three different accounts with those in its own account.

Sentinel gave creditors in one account (“seg one”) their money back after Citadel purchased some assets, FT said.

But the SEC opposed the transfer, saying that odds were that the refunded assets may have belonged to creditors in a different account, known as “seg three,” FT said.

The NFA’s investigation uncovered a $440 million shortfall in “seg three” and a $65 million gap in “seg one.” But Dan Roth, president of the NFA, told FT that so far there was no indication that “seg three” funds had been depleted to pay “seg one” clients.

He also said that he was not aware of the SEC having “any hard information” to support its conclusion that the refunded assets came from a different account.

A spokeswoman for Sentinel said the company had no comment.

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