Three U.S. hedge fund executives have been charged with securities fraud, among other things, over allegations that they secretly restructured their funds in order to prevent a large redemption.

U.S. authorities announced that a federal grand jury has returned a 19-count indictment charging three executives of New Stream Capital LLC, a Ridgefield, Conn.-based hedge fund, with conspiracy, securities fraud, and wire fraud. The three surrendered to the FBI in New Haven Tuesday, and were later released on bond. They pleaded not guilty to the charges, which have not been proven.

According to the indictment and statements made in court, in November 2007, New Stream launched new feeder funds, one based in the U.S. and a series of funds based in the Cayman Islands. It also planned to close its existing Bermuda Fund, and require its foreign investors to move their investments into the Cayman Fund. However, one of its largest investors decided to redeem its whole investment in the Bermuda Fund. It alleges that, in order to prevent that redemption, the executives devised a scheme to secretly keep the Bermuda Fund open and give priority to its investors.

The indictment also alleges that the firm failed to inform investors who had transferred into the Cayman Fund that the Bermuda Fund was remaining open, or that it was being given priority over the Cayman Fund. And, it says the firm continued to market to investors by concealing the magnitude of the pending redemptions, and by using deceptive marketing materials that failed to disclose the existence of the Bermuda Fund.

Each of the defendants is charged with one count of conspiracy, 10 counts of securities fraud and eight counts of wire fraud.

At the same time, the U.S. Securities and Exchange Commission (SEC) also brought charges against the firm and the executives. The SEC is seeking a variety of sanctions and relief against them including injunctions, disgorgement of ill-gotten gains with prejudgment interest, and penalties. Its allegations haven’t been proven either.

“Hedge fund managers who put greed ahead of full disclosure to investors violate a fundamental trust,” said George Canellos, acting director of the SEC’s division of enforcement.