That’s exactly what happened. After Grimstad filed his suit, the Chatham camp countered, claiming Grimstad had used company money to pay a Las Vegas escort $4,000 for “sexual activities” and later hired her and her mother. The New York Post put the story on its front page under the headline “Frisky Business.” (Grimstad has called those allegations “false and meritless.”)
It’s no wonder Chatham’s side would enlist Cohen, long known for his doggedness on behalf of Trump. And as it happened, the hedge fund owned the tabloid, the National Enquirer, that he had just used to try and catch and kill stories about the future president.
SEC Questions
Behind the salacious headlines was an issue that’s drawing scrutiny from regulators: bond prices. Grimstad claimed in filings that Chatham had manipulated iPayment bonds to seize control of the company.
The Securities and Exchange Commission has stepped up examinations of various bond funds lately, inquiring about their relationships with brokers and how they value debt. Wall Street’s main regulator has been looking into opaque markets since the financial crisis, uncovering a wide swath of bad behavior from lying salespeople to bogus quotes from brokers.
Chatham itself has been undergoing its first ever exam by the SEC’s inspections division, according to people familiar with the 16-year-old firm. SEC employees have questioned the firm on subjects including its pricing of bonds and conversations with various bond dealers. An SEC spokesman declined to comment.
The SEC has increased its focus on the valuation of securities across the market, said Jacob Frenkel, a lawyer at Dickinson Wright. Recent cases brought by the regulator show it’s “trying to ensure that investors have a full and fair understanding of how instruments in the market are being priced.”
Chatham’s trading has drawn scrutiny before. In 2016, the Financial Industry Regulatory Authority opened a review of the brokerage Seaport Global Securities that, while focusing on that firm, included an examination of its relationship with Chatham, people familiar with the matter said. The next year, Seaport received internal complaints that brokers there agreed to buy bonds from Chatham with the promise the hedge fund would repurchase them at higher prices, according to people with knowledge of the situation.
Finra, the brokerage industry’s main watchdog, subsequently concluded its review, and it’s unclear what if anything resulted from it. The regulator declined to comment.
Seaport Global defended its practices. “Since it was founded in 2001, Seaport Global has been in full compliance with all laws and regulations governing our industry,’’ the company said in a statement. It declined to comment further.