It was a surprisingly balmy winter day in the mansion-dotted countryside west of Calgary, and Brian Hunter had a look of suppressed surprise on his face, like a recent escapee who, thinking himself finally free and clear of the hounds, walks into a bar for his first drink as a free man only to find the Policeman’s Ball going on there.

Hunter, a mathematical genius and gambler of epic proportions, a briefly shining Wall Street star whose hedge fund bets may have bumped up the price of natural gas flowing into homes and businesses across North America while personally earning him $100 million in 2005 (all amounts in U.S. dollars), evidently knew he was a wanted man. At that moment, last December, there was only a mild hint that Hunter, who in late September 2006 triggered the biggest loss by a single trader in the history of the securities markets – a whopping $6.6 billion over the course of two weeks – was being suspiciously eyed by U.S. authorities. But then, in June 2007, he was the prime subject of hearings held by the United States Senate’s Permanent Subcommittee on Investigations.

By July, the subcommittee released a damaging report that found Hunter, as a gas futures trader with the now defunct hedge fund firm Amaranth Advisors LLC, had, through his excessive speculations, been the primary force responsible for inflating the price of natural gas and distorting the market in North America in 2005 and 2006. Thanks to Hunter, stated the report, Amaranth triggered “significant price movements in the natural gas market [that] demonstrate that excessive speculation distorts prices, increases volatility, and increases costs and risks for natural gas consumers, such as utilities, who ultimately pass on inflated costs to their customers.”

On July 25, the Commodity Futures Trading Commission filed a civil enforcement action against Hunter, accusing him of illegal trading activity by trying to manipulate natural gas futures prices. Gregory Mocek, the CFTC’s enforcement director, told reporters then that Hunter “actually bragged about flexing his muscles upon America’s natural gas markets.” The CFTC is now seeking to permanently block Hunter’s access to all U.S. commodity markets and seeking fines of $260,000 for trading violations.

The day after, things only got worse for the enigmatic, 33-year-old Calgarian. For the first time in its history, the Federal Energy Regulatory Commission (FERC) exercised new powers – powers Hunter’s lawyers are aggressively trying to block on jurisdictional grounds – to assess civil penalties against Amaranth to force it to disgorge profits totalling an astounding $291 million. Of that, FERC is seeking $30 million specifically from Hunter.

All this for purported illicit trading tactics in New York Mercantile Exchange (Nymex) natural gas futures contracts in the first half of 2006. “These enforcement actions are very significant,” FERC Chairman Joseph T. Kelliher said about the charges against Hunter, Amaranth and another company involved in other natural gas shenanigans. “They represent the first prosecution of market manipulation by the Commission with the new enforcement powers Congress gave us two years ago. These actions also represent the first time the Commission has proposed maximum civil penalties.”

Hunter’s New York lawyer, Michael Kim, says his client is being used as a political scapegoat by U.S. regulators and will vigorously defend himself against all the charges.

A Rogue or Just Wrong?

After Hunter’s bad bets on natural gas, Greenwich, Conn.-based Amaranth, one of the world’s largest and most respected hedge-fund management firms, evaporated like a puddle in a heat wave. Investors in America and abroad – including pension funds such as the San Diego County employees’ retirement fund and 3M – were walloped by the collapse. (On the positive side, with Hunter and Amaranth out of the game, our homes got much cheaper to heat. The spot price of natural gas fell from $7.49 per million British thermal units in late August, 2006, to $3.66 per MMBTU the month after Amaranth’s collapse, the lowest level in four years. The Electric Power Research Institute called the price drop “stunning . . . one of the steepest declines ever.”)

Hunter’s now fabled implosion triggered multi-million-dollar lawsuits by investors against him and Amaranth. The San Diego County Employees’ Retirement Association wants $150 million from them. And last July (a particularly bad month for Hunter) a Manhattan gas futures trader named Roberto E. Calle Gracey filed a federal suit seeking class-action status for fellow natural gas traders, claiming Amaranth and Hunter’s “manipulative trading caused traders of natural gas futures contracts, including the plaintiff, to suffer substantial losses.”

Hunter’s trading life dominated the financial headlines in 2006 and early 2007. Some people called him a “rogue trader,” a guy given “too much rope, too much pressure, or both,” said Alternative Investment News. Others still see Hunter as a meticulous number-cruncher who simply got caught by the chaotic unpredictability of weather. Hunter’s downfall also sparked highly imaginative, frequently derisive and often inaccurate wildfires of gossip across the financial blogosphere about just who this furtive Calgary chap is. The blogs only further masked and mythified Hunter, who, London, England’s Sunday Times reported last year – very likely wrongly – had hired bodyguards to protect him from vengeful colleagues and investors after Amaranth’s collapse. (Undermining the Times’ vengeful colleague theory is the fact that four Amaranth employees have joined Hunter in a new venture called Solengo Capital. More on that later.)

To this day, DealBreaker.com, a widely read and bitingly satirical Wall Street blog, continues to run a photo of some poor shmo it claims is Hunter holding a whopper of a salmon. Though the fisherman in the now infamous photo bears a slight resemblance to Hunter, it’s not him. But Hunter himself seems content to allow the misrepresentation to continue.

Amaranth’s flameout also prodded the U.S. government to re-examine – much to the chagrin of the very industry in which Hunter temporarily enjoyed hero-like status – the almost non-existent regulatory policies governing hedge funds, a potentially very lucrative investment instrument yet one considered so risky that U.S. securities laws forbid traders to even chat about what they do to anyone but the most sophisticated and accredited investors.

No wonder that, aside from thousands of burned investors, politicians, regulatory bureaucrats and, perhaps, millions of homeowners aghast at their home heating bills in 2006, practically every journalist on the planet who covers the affluent, shadowy world of Wall Street, and, especially that murkiest investment sector of them all – hedge funds – wants to corner Hunter for a chat.

So here he was opening the door of his own four-car garage, where presumably he keeps that head-turning, silver Ferrari F430 Spyder (about $400,000 new) he drives in summer and a stately but blisteringly fast $310,000 Bentley Arnage he is said to prefer during Calgary winters. The garage is part of a freshly built rancher-style home, Hunter’s private sanctuary nestled atop a hillside on exclusive Escarpment Ridge View, his warm cherrywood living-room floor framed by a huge window overlooking a postcard view of the frosted Rockies. When visited last December, small stone gargoyles, tumbled around the back of the house like miniature Easter Island relics, hadn’t found their places on the still muddy, un-landscaped property.

Hunter – who, despite his infamy, maintains such a low profile in Calgary’s investment community that well-connected traders here joke that they are not sure he actually exists – bought the empty 2.5-acre lot in Rockyview in December 2004 for $550,000 Cdn. It was just before the zenith of his personal success: in 2005, filings with the Permanent Subcommittee show, Hunter personally made $100 million in commissions as Amaranth’s whiz-kid gas trader. He was ranked 29th in Trader Monthly’s list of highest-earning traders in the world for 2005. He’d set Wall Street abuzz with his big, brash bets that earned Amaranth an estimated $1 billion in profits that year.

The tall security fencing around Hunter’s house, which he shares with his young, blond wife and their two-year-old, is unusual for even this rarefied patch of well-heeled homesteaders. The fence hadn’t been completely unfurled and erected yet this past spring, and wires dangled from the speaker identification system designed to eventually keep strangers and pesky reporters at bay – if they could find him. A National Post article that appeared shortly after Hunter’s hedge-fund cave-in in the fall of 2006 featured a picture of a turreted manse reported to be his, but, in fact, belonged to his immediate neighbour. The paper missed its target by a hundred metres or so.

The Silent Type

Now, here was a reporter at the door who had actually found him, a reporter with a deep-down feeling that the chance of the savvy but silent Hunter granting an interview was about as likely as Osama Bin Laden turning up on Oprah. Hunter, opening the garage door just a crack, appeared in a crisp, white shirt opened a few buttons at the neck. He looked rather dashing and impeccably spotless for a car nut mucking about his garage. He is tall, athletically built, with moderately long curly hair, dimpled, Hollywood handsome, with piercing, not unfriendly eyes.

As expected, he immediately waved off the idea of any interview with anybody. “I have lawsuits against me, so I can’t talk about this anyway,” he shrugged, though it was clear he was just proffering a handy excuse. Talking isn’t his thing, trading is. He then added, seemingly sincerely, “be careful going down the driveway. It’s a bit tricky right now,” then closed the garage door.

And that’s as close as any journalist has come to Hunter since his great misstep, even as he now attempts to rise from the multi-billion-dollar ashes of failure to launch his own hedge fund, Solengo Capital. The firm set up in May on the second floor of a modest, three-storey office building on 17th Ave. SW, across the street from a dilapidated strip mall that boasts little more than “George’s Barbershop” and someone offering “colon hydrotherapy.” It’s a noticeable downgrade from the shared office space Hunter enjoyed on the tenth floor of Bankers Hall West as head of Amaranth’s energy trading desk. But the dingier digs may afford Hunter more of the anonymity he carefully cultivates, not unlike many others in the guarded hedge-fund industry.

Even his competitors won’t talk about him. Last fall, shortly after Amaranth’s collapse, this writer chatted briefly with an employee of Deutsche Bank, which shared office space at Bankers Hall with Hunter’s Amaranth energy desk. But after learning she was speaking to a reporter, the Deutsche banker immediately clammed up, then chased after the departing writer and almost tearfully begged that nothing said be quoted. She revealed that everyone on the tenth floor had been warned not to talk about Hunter to reporters or they’d risk losing their jobs.

Hunter’s sharing of space with Deutsche Bank must have been a somewhat tense arrangement to begin with. He had worked for the German bank in New York as head of North American natural gas trading, pulling down $1.6 million in salary and bonuses in 2002. But things soured in December, 2003, when Hunter, now supervising the bank’s gas desk, lost $51.2 million in a single week, a loss he blamed on an unforeseeable run-up in gas prices and Deutsche Bank’s supposedly faulty software for electronic trade monitoring and risk management. Hunter quit the bank in 2004 and sued it in New York State court for bonuses he says the bank still owes him. That case is still pending.

Hunter was a country kid who grew up just outside Calgary. In university, according to Wall Street Journal reporter Ann Davis – the only reporter to get an interview with Hunter (this before his fall)– Hunter was too broke to pursue his love of skiing. Now he could probably buy an entire ski resort. Davis (no relation to this writer) interviewed Hunter in Greenwich in spring 2006 and again at his Calgary office the following July.

“From his desk on a trading floor,” she wrote for the WSJ, “Mr. Hunter monitored dozens of ‘instant messaging’ tabs from brokers and pored over weather screens. Six traders were there on one day this summer, in a space crammed with boxes of Kit Kats and Hershey bars, microwave popcorn and bags of running clothes. The only fancy touch was a basketball signed by Michael Jordan encased in Lucite.”

The man the New York Post referred to as Amaranth’s “youthful, gun-slinging star” has long shown a flair for complex mathematics. He’s apparently not so good at figuring out hurricanes. At the University of Alberta, Hunter earned a master’s in applied mathematics and an honours degree in physics. But he also studied the complex theory of financial derivatives at the U of A’s department of mathematical and statistical sciences with Robert Elliott, a respected expert and theorist in the emerging field of financial modeling and derivatives. Like most people intimate with Hunter, Elliott, now with the University of Calgary’s Haskayne School of Business, declined an interview with Alberta Venture, saying he would be busy travelling and lecturing throughout Europe for the summer.

Elliott must have taught his student well. After beginning his career in 1998 as a quant/exotic options trader for TransCanada Energy in Calgary, Hunter moved to New York, toting fresh new theories about options pricing. Despite leaving Deutsche Bank on a sour note, he joined Amaranth in 2004 and was entrusted with a good chunk of its $9 billion in assets. He earned the firm double-digit returns for several years. That got Wall Street gossiping. “These guys talk a lot, and all the traders were talking about Brian,” says one U.S. source. They were “obsessed by him, because he was trading such gigantic bets that they either had to go with him and get caught up by the tide or go against him and get crushed. They all felt he was this huge, dominant force in the market. He was trading bigger bets than anyone had ever seen.”

Even Wall Street’s biggest hedge-fund tycoons took notice. Steve Cohen, founder of the $12-billion hedge firm SAC Capital and a bona fide celebrity in finance, offered Hunter a $1-million bonus to leave Amaranth and come work for him. But Nick Maounis, Hunter’s boss and a hedge fund manager who enjoyed a rock-solid reputation at that point, and who had built Amaranth into major player, wanted to hang on to his prize trader.

Convertible bond and equity prices were sliding, but with oil and natural gas prices soaring, Hunter’s expertise was that much more valuable. Maounis named Hunter co-head of Amaranth’s energy desk, and let him control his own trades. That moved miffed Harry Arora, another venerable hedge-fund warrior at Amaranth who felt snubbed now that he had to share control of his energy desk with the upstart Hunter. Arora eventually left to start his own fund, Arcim Advisors, in 2006. Alternative Investment News recently voted Arcim and Arora, a former Enron employee as well (though not involved in either Enron’s or Amaranth’s hijinks), its “Emerging Manager of the Year.”

Hunter had such pull at Amaranth that Maounis also greenlighted Hunter’s request to pull up stakes in New York and return to his Alberta home turf, a move many critics argue unleashed Hunter by weakening the risk-management structures Amaranth had boasted would keep ambitious traders in check.

In simple terms – a full explanation would require a chapter in a book – Hunter made complex wagers on notoriously volatile natural gas prices at multiple points in the future while closely watching how current and forecasted weather might affect the prices and stockpiles of natural gas stored in underground storage caverns. He also bought what is known as “winter” gas several years into the future. This was risky, not just because predicting prices so far ahead is difficult but because fewer traders play that cagey game, making it tough for Hunter to quickly exit contracts if his bets started looking dubious. But until August of 2006, the strategy seemed to be working sweetly.

In 2005, thanks to Hunter, Amaranth investors cashed in big time on the misery of Hurricane Katrina, which cruelly pounded the southern U.S., wrecking oil and natural gas production facilities and driving up the price of those commodities. Hunter had rightly bet natural gas prices would rise then, and Katrina was his lady luck. Then he continued betting billions that natural gas prices would rise on the heels of even more hurricanes in 2006 – and why not?

Even the U.S. National Oceanic and Atmospheric Administration was steadfastly predicting a particularly nasty year, with an above-average eight to 10 hurricanes forming in the Atlantic, with as many as three of those expected to bash U.S. shores. As it turned out, NOAA got it flat wrong: There wasn’t a single hurricane in the Atlantic that year, meaning natural gas prices tumbled and Hunter found himself in the middle of his own financial storm. He had rolled his dice the wrong way. And, with his usual calculated confidence, had bet big. Very big.

Stepping on the Gas

Hunter’s positions in the North American natural gas market were so enormous he was said to actually control as much as half the North American market at times. Examining Amaranth’s trading records and interviewing numerous witnesses – a process Hunter somehow managed to escape while his former Amaranth colleague Shane Lee (who this past summer joined Hunter’s Solengo) did not – the Permanent Subcommittee found Amaranth deftly avoided what few regulatory controls there were to restrict the size of their positions in natural gas. Amaranth had switched from trading on the Nymex to the Intercontinental Exchange (ICE) where there are currently no restrictions on trade size.

The trading records examined by the Subcommittee also disclosed that from early 2006 until its collapse, Amaranth was the Godzilla of natural gas. In part, Hunter used the so-called “Enron Loophole” – a regulatory glitch, written into the law at the behest of Enron lobbyists before its own infamous unravelling, that exempts electronic energy exchanges from the regulatory oversights that keep Nymex trading in check. When Nymex officials came knocking on Amaranth’s door because of concerns over its multitudinous contracts, Hunter simply hopped over to electronic trading on ICE.

Whereas the Commodity Futures Trading Commission (CFTC) defines a “large trader” in natural gas as one who holds at least 200 contracts, and by law Nymex must examine a trader’s position if it exceeds 12,000 natural gas contracts in any one month, Amaranth held as many as 100,000 natural gas contracts in a single month. In one instance, that represented 5% of the natural gas used in the entire United States in a year.

But, as the subcommittee investigators wrote: “The current regulatory system was unable to prevent Amaranth’s excessive speculation in the 2006 natural gas market.” According to the Permanent Subcommittee’s bipartisan report, excessive speculation by hedge funds may account for as much as $20 to $25 of a barrel of crude oil. “Between 50 cents to $1 per gallon of gasoline may be a direct result of irrational and unethical behaviour in the commodity markets,” said the CFTC.

The FERC and CFTC accusations involve Amaranth’s manipulation of the final, or “settlement,” price of the Nymex natural gas futures contract in February, March and April 2006, “by selling an extraordinary amount of these contracts during the last 30 minutes of trading before these future contracts expired, with the purpose and effect of driving down the settlement price.”

Hunter’s big lasso around the natural gas market “made him a lot of enemies,” suggests a hedge fund industry observer who asked not to be named. “Some guys were jealous. Other guys couldn’t believe he could make that much money. Everyone was incredulous that he was so young and he had made so much money on this one market.” But hedge fund trading in natural gas futures is what the players call a “zero sum” game, meaning when someone like Hunter wins, someone else loses.

“He was trading in such great quantities that people felt it was making the market really volatile and it was kind of a dilemma. If traders lost one day because the market seemed to have a lot of momentum going one way, everyone was saying ‘Well, Hunter must have been doing that.’ He took on this mythical kind of status. A lot of traders didn’t like it because they felt he was making it difficult for them to make money.”

And when things started to sour in August, 2006, as natural gas prices unexpectedly began dropping, Hunter’s vast positions made it difficult for him to exit quickly and cut his losses by finding buyers who might take on his contracts. “And that’s when the vultures come circling,” says Beth Hamilton-Keen, a senior portfolio manager at Mawer Investment Management Ltd. in Calgary. “Nobody is willing to be on the other side, and they just kind of sit back and snicker and let him [Hunter] suffer. They know that they can slip in and clean up when they are done. It becomes quite malicious.” In the case of Amaranth, JP Morgan Chase of New York and Citadel, a large Chicago hedge fund, swooped in and snapped up – at a deep discount – the scraps of Amaranth’s energy portfolio.

Rich and Infamous

In the premiere issue of Condé Nast’s chunky Portfolio magazine last May, author Tom Wolfe of Bonfire of the Vanities fame savaged hedge fund managers as greedy, status-fixated, arrogant and coarse “buccaneers.” With all they have going for them – bright, highly educated, and usually rich – Wolfe asked aloud in the article, “What inna nameagod is their problem?”

Their standard “two and 20” fee structure certainly isn’t a problem. It gives the most successful managers unimaginably stratospheric pay packages (SAC Capital’s Steve Cohen personally earned close to a billion bucks in 2005) and raises envy among other kinds of investment managers. The formula means hedge fund managers get a guaranteed 2% of all assets invested with them right off the top, and 20% of any profits.

“It’s much more lucrative than the typical commission structures elsewhere in the investment industry,” says Hamilton-Keen. “Hedge funds definitely have the reputation of attracting those who want to make money in a hurry. And when they make their fee, they don’t have to give it back when they lose it the next year. It’s definitely very lucrative for money managers to have that kind of a fee structure. I get compensated very nicely; I feel very satisfied with what I earn. But the management fees we charge our clients start at 1% [of assets under management] and drop from there. It’s called a tapering fee schedule. The more assets that we manage, the lower the fee schedule.” Hamilton-Keen gets bonuses as well, based on the profits of the firm as a whole, but no one rakes it in like the hedge fund managers do.

The hedgers are notorious for their flamboyant spending on cars, mansions, personal jets and anything that reeks of status. For instance, one hedger recently bid $650,000 merely to enjoy a “power meal” with hedge-fund superstar Paul Tudor Jones II at a charity event for Jones’s own Robin Hood Foundation, which featured Jon Stewart of the Daily Show as master of ceremonies and rapper Jay-Z as a celebrity guest.

Whatever Tom Wolfe says about hedge fund managers, another trait they seem to exhibit is forgiveness, or maybe it’s forgetfulness. Several of the people at the centre of the Amaranth debacle have already bounced back, including Nick Maounis, whom the New York Post described as a hedge-fund manager who “hated ‘cowboys’ flying by the seat of their pants.” Yet it was Maounis who was blasted for the poor oversight that failed to rein in Hunter. Bloomberg News columnist Matthew Lynn wrote that Maounis should be banned from the capital markets for a number of years, but Maounis is reported to have found backers for a new investment firm that should be operational in 2008.

As for Hunter, he’s already got his Solengo Capital office more or less running at Centre 33, a 24-year-old building on the corner of 17th Avenue SW and 33rd St. SW. The Solengo team consists of, besides the aforementioned Shane Lee and a few others, Shondell Sabad, a former president from 2000 to 2001 of the Calgary CFA (Chartered Financial Analyst) Society. Although Hunter founded the firm, he will take, at least on paper, a subsidiary position as portfolio manager, commodities volatility.

Sabad and Hunter met when both worked for TransCanada Corp. in the late ’90s, where they became pals, often playing pick-up basketball games together. Widespread media and blog reports suggest the Solengo team has already raised between $700 million and $800 million from Arab and Russian investors. Considering the secrecy surrounding Solengo, it’s easy to see how such figures are conjured up in the frothy world of finance. But if they were true, it would mean that, according to the usual hedge-fund fee structure, Hunter and his boys have already split $14 million in spoils before making their investors a nickel.

It would also mean Solengo is breaking Alberta laws. According to the Alberta Securities Commission, Solengo, as of July 2007, had not registered with the securities commission. By law, if Hunter has established a company trading securities or other investments from Calgary, it must register with the ASC, even if Hunter is doing all his fundraising abroad or from the office also recently set up in Greenwich, the wealthy, leafy epicentre of the hedge-fund world. Failure to register, explains Mark Dickey, the ASC’s senior communications adviser, could result in a cease-trade order being placed on Solengo “and we can also levy administrative penalties.”

Inquiries by Alberta Venture indicate Solengo has not yet begun trading operations and has yet to raise any funds from investors, meaning the firm has broken no laws. Surprisingly though, when Shondell Sabad was offered the opportunity by this magazine to publicly refute the rumours Solengo has raised hundreds of millions, and thereby put any conjecture to rest that Solengo might be breaking any laws, he declined comment.

The $1.9-trillion hedge-fund industry has been humming about Hunter’s new venture for months. But visiting Solengo’s office brings to mind going to a different kind of dealer. On June 19 this reporter walked in past the main security door of Centre 33 and up a flight of stairs to Solengo’s office on a floor it shares with a dental lab and a financial firm. Outside Solengo’s door, up the hallway past a cheap-looking Cubist-like painting, sat four leather chairs accented by single potted plant. A knock, and the door was opened, like Hunter’s garage door, a mere crack. One of Solengo’s traders peeked out. Behind him were barren, grey, cinder-block walls, a small window outlined in unfinished, rough, wooden framing. The office was still apparently undergoing renovations. At that point it had all the ambiance of a jail cell.

“Who are you?” asked the man, who didn’t identify himself.

“Is Brian here?” I asked.

“No.”

“Is he in the country?”

“I’m not sure.”

“Is there a way I can reach him?”

“He has an e-mail address. You can e-mail him.”

“I don’t have that,” I told him.

“I’m not going to give that out, no,” he replied as he shut the door.

On another day, a Solengo trader stood outside the office, puffing a cigarette. On the back of the grey T-shirt he was wearing were the words “trust us.” Yet so far Solengo has proven itself even more clandestine than Amaranth was. And more litigious. Soon after Hunter formed the firm, it e-mailed a digital brochure describing itself, its staff and its investment strategies to a select group of prospective investors. A copy of the brochure wound up on NakedShorts.com, a satirical investment blog written by Greg Newton, a former financial reporter and publisher based just outside New York City. From NakedShorts, the brochure made its way onto the web pages of DealBreaker.com, where its editor, John Carney, like Newton, took aim at the brochure.

Newton makes little secret of his loathing for Hunter, “Because everything I heard about this guy was ‘arrogant bastard,’” he says. Newton wrote that Hunter’s marketing strategy is “the unintentional comedy that is the shame-free Solengo Capital marketing brochure.”

In no time, Newton got a call from Sabad, now chief operating officer and chief financial officer of Solengo. Besides sharing a friendship, Hunter may well have hired Sabad to give Solengo a sheen of respectability. Beth Hamilton-Keen, who became president of CFA Calgary two years after Sabad served in that capacity, speaks highly of him. She calls him “intense, dedicated. And I would say his ethics are certainly intact. I haven’t seen anything to the contrary of that, and certainly as CFAs that is something we all value. And Shon always took that seriously.”

Newton witnessed Sabad’s intensity and focus last March, soon after he posted Solengo’s brochure on NakedShorts. Sabad e-mailed Newton, insisting he remove the brochure in accordance with U.S. securities laws. As mentioned, hedge funds are forbidden to advertise or even discuss their funds and strategies with anyone but accredited, sophisticated investors.

Timothy Sykes, a New Yorker who has written about Hunter on his blog at timothysykes.com, runs his own $10-million hedge fund, Cilantro, and recently published a book called An American Hedge Fund that gives a young insider look at the hedge-fund industry. “If someone said ‘How is your fund doing?’” explains Sykes, “I could not answer that. And I think it’s freaking ridiculous… Because the hedge-fund industry is considered so risky, we’re not allowed to advertise, we’re not allowed to talk to the press. Most hedge funds aren’t even listed in the phone book. It’s madness but that’s what the industry is like.”

But Newton argues that most funds are only too happy to hide behind the laws. Still, no other hedge fund firm but Solengo has ever sued him for commenting or publishing material about their marketing strategies. “This is absolutely out of the ordinary. What normally happens in these situations is that we all have our fun, and then we take them [the postings] down and get on with our lives.”

After Newton missed an initial e-mail from Sabad because it went into a spam folder, Sabad phoned Newton, who was on a trip. “I was checking out of a hotel, and I had a 500-kilometre drive ahead of me. So I said I’d take it down when I got home,” says Newton. When Newton got home later that same day there was an e-mail from Sabad, again warning him to get the brochure off the Internet or face a lawsuit. “I sent him a less than entirely warm reply,” recalls Newton. “I told him I’d take it down when I got home, and, by the way, grow up!” The brochure came down from NakedShorts after just 36 hours.

DealBreaker.com editor John Carney held off a little longer. DealBreaker, which bills itself as a “Wall Street tabloid” and gossip site, initially fought the brochure’s removal, telling Reuters last March that the material had legitimate news value. Then Solengo slapped DealBreaker with legal papers, claiming in a letter from its lawyer, “public disclosure of the brochure is illegal and improper. It contains confidential information that is proprietary in nature about the company’s future plans.” Contacted shortly afterwards, Carney, citing the pending lawsuit, said he couldn’t discuss Hunter or Solengo.

Eventually the brochure was pulled from the website and on July 19 David Minken, DealBreaker.com’s publisher, confirmed that “a mutual agreement” had been reached with Solengo. “We pull the brochure; they drop the lawsuit.”

Hunter, meanwhile, is firing back at the regulators, seeking a restraining order against FERC, which he claimed in an affadavit filed in a New York court has driven Solengo to “the brink of complete disintegration.” As a result of the agency’s charges, he claimed, a possible $800 million in capital ready to enter the venture has dwindled to $100 million and two traders had resigned. In addition, The Alberta Securities Commission had indicated Solengo’s application to deal in securities might be hampered by the U. S. regulators’ accusations, the affadavit said.

For his part, Sykes thinks Hunter and hedge-fund managers in general are getting a bum rap. He calls Tom Wolfe’s portrayal in Portfolio “disgusting…. It was one of the worst articles I’ve ever read because it was so factually inaccurate.” He says the majority of hedgers he’s met are hard working, “decent people. We want to get paid for all that hard work, and when we get paid, we let loose. You have to let loose, because this is a stressful job. Financial speculation should not be looked down upon.”

Newton agrees on at least that point. Only “a tiny fraction are irredeemable ass-hats,” he says. “And an even tinier fraction are lucky not to have been indicted.”

Still, he has no encouraging words for Hunter’s prospective rise from the ashes. “The arrogance of Hunter and his colleagues is that a lot of other guys have big blowups, but they at least have the decency to go dark for a couple of years. They go home and at least put on a pretence of rueing their mistakes. The arrogance of these [Solengo] people coming out with a brochure, what, three months after Hunter had been responsible for one of the biggest financial implosions around, is too much.”