Last June, Francis Koenig, the founder of the hedge fund firm AdultVest, accepted the Hedge Fund Launch of the Year award at a black-tie dinner at the Cipriani Club that included fund managers from Blackstone Group and Paulson & Co.
Today, Koenig is fighting fraud allegations as the porn industry in which he invests suffers right along with the rest of the economy.
According to two sources who spoke to the trade publication FINAlternatives, Koenig's operation, which he calls the adult industry's first hedge fund, is just another fraud. One former investor alleges that Koenig looted the fund's coffers to finance his "fine art, expensive wines, cars, personal trips and alimony."
A former employee of Koenig's firm also claims that the fund is quickly running out of money and the assets in which it has invested, including the domains iporn.com and handjob.com, are not worth what Koenig claims they are.
Koenig denies the charges, saying the investor is in a tough financial position and is frustrated after trying to redeem his money after it was already deployed in new investments. He says that iPorn.com is doing well and the money he spends on his lifestyle comes from his own paycheck, not the company's funds.
The January issue of Atlantic Monthly included a story about the porn industry in which Koenig was quoted saying that AdultVest was up 50 percent last year. Koenig now claims he was misquoted, but the story online does not include a correction to that effect.
So is Koenig legit? If what his former employee says is true, the picture certainly looks bleak for AdultVest's future:
The former employee, who says there were about 11 employees when he worked at the firm, claims that some of the few remaining staff members, including a secretary and the firm's Web site manager, have had their salaries halved because the firm is running out of money. He also says that they are only coming into the office once or twice a week.
Even the porn industry has one-hit wonders.
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