I have written before, briefly, about AdultVest, an investment company specializing in investments of an adult nature – hence the name.  AdultVest’s sole fund had allegedly been up 50% over 2008 in a year when the only other people making that kind of money were named Madoff, which seemed kind of fishy (Ed: like a few other things, I bet) but which founder Francis Koenig swore was legit because everyone was watching the porno these days on account of having nothing better to do. Now accusations are being thrown about by a former employee that things were not actually on the up-and-up.

I want to get this out of the way right up front so we can all titter like ten year old boys about it, and move on.  The fund in question is called Priapus. A hedge fund, based on the porn industry, is named after a medical term for a neverending erection. Priapus -> priapism. Clearly, much more thought went into the naming of the fund itself than the management company, and one has to wonder what the next fund (since Priapus closed to new investors last November) will be named. Sodomus and A2M2$ are my favorites at the moment.

So Priapus may or may not have been actually making money, which hedge funds are generally supposed to do, according to the former employee:

“There is almost no money left in the fund,” the investor, who said he was privy to some of AdultVest’s financials via a court order, alleges. “Koenig has an American Express black card through the company that he uses on partying, girls and high living. Most money is missing and iPorn.com is not worth what he says it is.”

Okay, first of all, a black AMEX? Please, those became passe as soon as the first five-figure person heard about it.  All the real ballers these days carry the [REDACTED]. Second, iPorn.com sounds like it’s worth exactly as much as a lawsuit from Apple. But I’m actually kind of over Ponzi schemes now, so if this fund is doing nothing but funding the fund manager’s freewheeling lifestyle, that’s kind of kickass and something new.

This seems to have come to light thanks to one investor who went to pull his money out only to find…uh…it’s not there.  Koenig’s explanation is that it’s because the money has already been deployed to pay for the things you need to make a porno, such as towels and cameras and bleach.  Lots and lots of bleach. Okay, so…there was no money left in the fund at all? Okay, Francis. According to the unnamed employee, the fund’s money went to one of three places: two websites (the name of the second I’m not even going to post here, but which redirects to iPorn) and buying shares in a strip club operator. This is where $3 million supposedly went, which I have to admit, does seem kind of suspicious.

The former employee has already filed complaints with the FBI and the SEC, which used to not mean a whole lot but now that the SEC is actually trying, could lead to some hard, er, firm, er, solid charges. And he describes a typical day at the company which is kind of the opposite of what I envisioned working at a porn hedge fund company would be. First of all, everyone is wearing pants, and second of all, everyone has either had their salaries cut or their jobs cut, and those that do still have jobs only come to work a couple of days a week.

Koenig’s response to the accusations levelled by the former employee is pretty much summed up as, “ALL LIES,” and then some bumbling explanations that make no sense. As an example, the first time I mentioned the fund, it was in the context of an interview with The Atlantic in which he claimed the fund was up 50% in 2008. Now he’s backpedalling on that statement:

“We have not reported a 50% gain to anyone, including our investors,” he claims. “The fund had stopped taking capital at the $50,000 per unit and it raised the price to $75,000 per unit based on the fund’s progress and the investments that it had made. So we increased the per unit buy-in price by 50%.”

Riiiiiiight.  The guy who interviewed him is similarly unconvinced, and swears he absolutely did not misquote Koenig, and has the taped recording to prove it. My advice to you all is to stay long perp walks for the foreseeable future.