A Chilean firm at the center of a fraud controversy after one of its former fund managers admitted to hiding millions worth of losses, has named a new chief executive as it plans to reinvent itself as a venture capital group.
Aurus Capital named Raimundo Cerda Lecaros its CEO after its previous leader, Juan Carlos Délano Valenzuela, resigned from his post on May 9. Délano will remain an Aurus shareholder and serve as an advisor to the board, the firm said in a statement filed with the Chilean market regulator on Wednesday.
The management changes came roughly a month after former manager Mauricio Peña Merino was found guilty of hiding $35 million in losses he had piled up while running two funds. Peña Merino has since stated that he wasn't the only manager responsible for the vehicles at the time the fraudulent activities took place.
As part of the case, the firm stopped running public funds and withdrew from the asset management space, a spokeswoman for the firm said. It will now focus on venture capital.
In April, Aurus liquidated the two funds Peña Merino used to run, the multi-asset vehicle Aurus Insignia and the fixed income fund Aurus Global. The firm said in a statement to the Chilean market regulator that it had returned $47.4 million to investors.
Their closing ended a process that had been announced in October after the company discovered Peña Merino's fraud and he was subsequently fired.
‘Mr. Délano’s resignation corresponds to the new stage that Aurus faces, with a structure that has adjusted to a new business plan focused in the venture capital area,’ according to the Wednesday statement.
Aurus added that Délano was also stepping down because the firm had completed the process of offering a solution to investors regarding the losses the funds incurred.
Dealing with fraud
A routine audit in October revealed discrepancies in the valuation of derivatives and shares of private mutual funds in the Insignia and Global vehicles.
Upon confronting 'immediately' Peña Merino, who was a partner at the firm, about the issues he 'confessed to a series of irregularities and actions, fraudulent in appearance' in the valuation of instruments, Délano and the company's chairman Antonio Cruz Zabala said in a statement to the market regulator in October. Peña Merino, who had been with the group since 2009, was then fired on the spot.
The goal of the discrepancies was to help hide $25 million in losses in the funds, according to the statement. The firm later increased its loss estimate to $35 million.
In October, the Chilean agency that rates and approves the vehicles the country's pension funds can invest in scrapped Aurus’ only approved fund from its list.
While Peña Merino didn't run the Aurus Renta Inmobiliaria the regulator's move was influenced by the controversy surrounding the asset manager.
Chilean firms Grupo Patio and LarrainVial paid $6.5 million to take over the $300 million fund in February, according to Chilean news outlet El Mostrador.