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Ex-SEC aide involved in fund scandal?
Report: Derby profited from hedge fund accused of fleecing investors of millions of dollars.
July 26, 2005: 12:58 PM EDT

NEW YORK (CNN/Money) - The Securities and Exchange Commission's former operations chief made a bundle in a New York hedge fund being investigated by the U.S. Attorney's Office for fleecing investors out of tens of millions of dollars, a newspaper report said Tuesday.

Derby, managing executive for operations and management under former SEC Chairman William Donaldson, made a profit of $186,000 in the Sterling Watters hedge fund, which is also being sued by the SEC, the New York Post reported.

Derby is being sued along with 26 other investors who allegedly made profits by investing with Angelo Haligiannis, who ran Sterling Watters, the Post said.

Haligiannis was indicted by the U.S. Attorney's Office last September for running a pyramid scheme, and inflating returns and assets at the fund, according to the report.

The newspaper cited Institutional Investor's Alpha magazine as saying that Derby redeemed his entire $1 million investment in July 2003, just months after he joined the SEC.

Derby, who is leaving the SEC this week, and the SEC, which has filed suit against Haligiannis and Sterling Watters, did not return calls from the Post.

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