New York Magazine

Skip to content, or skip to search.

Skip to content, or skip to search.

Take the Hedge-Fund Money and Run


“Listen,” Jerry would say. “I have some money on the side, personal money. I’m waiting for permits, I’m building a new house, and there’s some money, but I need to keep it liquid.”

“Jer, give me the money,” Drenis remembers Angelo saying. “I know I have the restrictions where you have to withdraw quarterly, but for you I’ll make an exception. It’s just stupid, your letting the money sit in the bank now. You’re earning small returns.”

Drenis invested more than $700,000 in the spring of 2002, and close to $1 million in installments in 2003—then, in early 2004, he agreed to invest nearly $5 million, funds all from refinancing his family’s real-estate holdings. “It was a no-brainer,” Drenis says now. “He was making 10 percent a quarter.”

Angelo was actually making more than that. Within a year, Sterling Watters reported a net annual return on its investments of 53.93 percent, more than doubling the S&P 500’s 22.96 percent gain for 1996. A year later, the fund nearly tripled the market, claiming a 76.04 percent return. The year after that, Sterling Watters fell a few points short of the market’s gains, but in 1999, Angelo reported that he’d more than quadrupled the S&P’s 21 percent, earning a return of 87 percent.

Illustration by Kagan McLeod  

Living well may have been the best advertising for the fund: His friends and investors didn’t fail to notice his black Porsche 911 Turbo and his $10,000-a-month apartment in the Beekman in the East Fifties. He set up personal accounts at the Palms, the Bellagio, and the Venetian in Las Vegas, the Tropicana and the Borgata in Atlantic City, and Foxwoods. As if his parents could be any prouder, he also married a beautiful girl from the old neighborhood: Liz Batalias, a dark-haired, olive-skinned NYU M.B.A. daughter of Greek immigrants. Liz’s family was wealthier than Angelo’s. Her father, Michael Batalias, owns the construction company EMD Contracting in Long Island City, and he reportedly threw the couple a six-figure wedding in Crete (and invested nearly $3 million in Sterling Watters). Liz’s brother, Louie Batalias, was the best man. In time, there was a daughter, Christina, born in 2003.

“He made no secret that he was living large,” says Jim Ziosis, a Greek-American investor who owns a home-décor business in Mineola. “And he made no secret that because he and his family made so much money with the fund, he was getting them all new cars and that his sister’s wedding was going to be at Cipriani’s.” Many of Angelo’s investors altered their own lives accordingly. “Some people said, ‘Why am I killing myself working twelve hours a day when we’re making hundreds of thousands of dollars a quarter with Sterling Watters?’ ” says Ziosis. “Vacations, home additions, cars. There was a lot of that. We all believed we were making a ton of money.”

Angelo’s luck started changing at the beginning of 2000, the year the tech market began correcting itself and the S&P dipped by 9 percent. That same year, Angelo, who had just moved into a spacious office on the 55th floor of the Citigroup building, published an “investor kit” claiming the fund had cumulative returns of 1,073 percent from 1996 to the second quarter of 2000, and eventually reported that Sterling Watters had posted another dazzling net return (41.45 percent) for all of 2000.

In reality, the Securities and Exchange Commission says, Angelo’s fund lost $17 million in 2000. It was Angelo’s first losing quarter, and he faced a decision: Report the losses as any manager would do, or fudge the numbers and try to make a quick comeback before anyone caught on. According to the SEC, this was the first quarter Angelo published false balance statements.

He was never able to turn things around. As the 2000 tech correction turned into the 2001 nasdaq crash, then into the 9/11 bust and the Iraq War bust, Angelo’s losses, and his deceptions, grew more and more grandiose. In 2002, Angelo said that Sterling Watters had a net return of 17.24 percent when, the SEC now says, it lost $5 million. As the fund continued to dwindle, Angelo needed fresh cash to cover his losses. Which is why, by early 2004, he was so eager for Jerry Drenis to invest his $5 million.

By the time Drenis scheduled a wire, Angelo had lost his practiced cool, calling him every hour.

“Where’s the money?” Drenis remembers Angelo asking him. “The money didn’t come!”

Drenis told Angelo the bank was probably sitting on the money until the end of the day.

“I’m telling you, your bank is screwing you!” said Angelo, according to Drenis. “Today’s a great day! The market is positive! You know how much money you’re losing?!” The $5 million arrived on February 2.

Current Issue
Subscribe to New York

Give a Gift