FUND OFFICIALS TO PLEA GUILTY.

Byline: Daily News

The founder of a Valencia-based investment firm that operated a hedge fund agreed Friday to plead guilty to federal charges, admitting he lied to investors about a fraudulent operation that stole at least $2.5 million from investors, the U.S. Attorney's Office said.

Keith Gilabert, 35, of Valencia agreed to plead guilty to conspiracy to commit mail fraud, wire fraud and securities fraud, according to the U.S. Attorney's Office press release. As part of the agreement, Gilabert agreed to cooperate with investigators in an ongoing criminal probe.

In a related action, Gilabert and his company, Capital Management, were named in a federal lawsuit filed Friday by the U.S. Securities and Exchange Commission, the release said.

In the plea agreement, Gilabert acknowledged that he operated a fraudulent hedge fund and lied to investors in an effort to convince them to invest with his fund.

Gilabert admitted that from September 2000 through January 2005, CMG offered investments in a hedge fund called the GLT Venture Fund and collected more than $7 million from more than 40 investors.

Even though he claimed average annual returns of 27 percent since at least 2002, Gilabert concealed the fact that he had lost most of the investors' funds and that he had misappropriated investors' funds throughout most of GLT's operation.

Gilabert also admitted he paid off an insider at a large brokerage firm in exchange for his assistance in the fraud scheme.

Gilabert faces up to five years in federal prison.