Chatham hedge fund that owns newspaper chain hit with $19.3 million penalty

A Morris County-based hedge fund that owns 29 daily newspapers in fourteen U.S. states, including the Miami Herald and the Kansas City Star, will pay about $19.3 million in civil penalties to settle a claim that they improperly traded certain fixed-income securities.

Chatham Asset Management purchased the McClatchy newspaper chain in a 2020 bankruptcy sale.  None of the McClatchy newspapers are based in New Jersey.

The fines are also leveled at founder Anthony Melchiorre, 55, a Short Hills resident who owns 70% of the hedge fund.

“Chatham’s trading in AMI bonds had the effect of increasing the prices of those generally illiquid securities in a way that was disconnected from economic reality,” said Sanjay Wadhwa, deputy director of the Securities and Exchange Commission’s Division of Enforcement.  “We remain vigilant in rooting out such misconduct in the marketplace, including in the fixed income sector, where investments can be less liquid.”

According to the SEC, Chatham and Melchiorre consented to the SEC order without admitting or denying the agency’s findings.

“Chatham sought, received and followed advice from an independent compliance consultant about the manner of executing the trading in question,” a spokesman for Chatham said.  “The consultant reviewed Chatham’s trading annually for compliance with applicable laws and did not alert the firm to any issues. Importantly, the trading occurred more than four years ago in funds that have since been closed. The matter has been resolved, and we are focused on generating returns for our investors.”