In an article published by Forbes on Tuesday, it was revealed that 2002 World Series of Poker (WSOP) Main Event champ Robert Varkonyi has sued a hedge fund alleging fraud. He’s seeking to recoup his initial $1.4 million investment in a fund ultimately tied to a Ponzi scheme.
According to Forbes, Varkonyi “filed the lawsuit earlier this month against Chetan Kapur and his hedge fund firm, ThinkStrategy Capital Management. Kapur’s hedge funds had been invested in the Sarasota, Fla. hedge funds managed by Arthur Nadel, which turned out to be a $168 million Ponzi scheme.” Nadel is currently in jail serving a 14-year sentence.
Lest we forget that Varkonyi used to work for Goldman Sachs and has plenty of experience in the financial realm. The former Main Event champ became involved in the hedge fund in 2008.
That year marked the start of the largest financial crisis in the United States since the Great Depression. The Dow Jones Industrial Average dove from a high of over 14,000 in October 2008 to 6,600 in March 2009. In 2010, personnel located in the British Virgin Islands and Cayman Islands liquidated Varkonyi’s hedge fund.
Varkonyi invested in Class B units, but, according to Forbes, “Varkonyi alleges that some of the Class B assets were improperly swapped with assets of the Class A units ‘so that the assets of Class B were rendered valueless in the Ponzi scheme perpetrated by Arthur Nadel.’” Varkonyi did not comment to Forbes and has filed a 42-page lawsuit.
In 2002, Varkonyi banked $2 million for taking down poker’s most prestigious tournament. He defeated Julian Gardner heads-up in an event that drew 631 players. One year later, Chris Moneymaker blew the poker world open with his win in the Main Event, spawning the modern poker boom and bringing sites like PartyPoker and PokerStars into the forefront of the industry.
Posters on TwoPlusTwo were critical of Varkonyi and his wife for putting up a significant chink of money for the hedge fund in the first place. One person wrote, “They were stupid for investing so much of their net worth in one investment vehicle, especially a hedge fund. That is investment rule one.” What Varkonyi’s actual net worth was at the time is not clear.
To that extent, another poster on TwoPlusTwo argued, “Well, if he’s worth like $10 mil or something, sticking $1.4 mil into some shady hedge fund isn’t that ridiculous, but if he’s still only got about the $2 mil he won and sank 75% of it into this debacle, then he’s a complete moron.”
According to the Hendon Mob, Varkonyi has about $2.2 million in lifetime live poker earnings. In 2010, he finished 14th in a $2,500 No Limit Hold’em event during the WSOP for $37,000. One month earlier, Varkonyi took down a $500 No Limit Hold’em tournament held as part of the Venetian Deep Stack Extravaganza in Las Vegas for $65,000.
Ponzi scheme became a household term a few years ago when Bernie Madoff took nearly $20 billion from investors, an act that landed him behind bars. In fact, Madoff’s sentence was 150 years, the maximum allowed. He told the assembled crowd in court, “I have left a legacy of shame, as some of my victims have pointed out, to my family and my grandchildren. This is something I will live in for the rest of my life. I’m sorry.”
