Finance and Economics；Light Squared；Falling star；

Philip Falcone's largest investment has filed for bankruptcy;

“Buying 100% of companies, that's where I think a great opportunity is.” So said Philip Falcone, a hedge-fund manager, at an industry bash on May 9th. His opinions will count for less now. On May 14th LightSquared, a wireless venture 96%-owned by Harbinger Capital Partners, his fund, filed for bankruptcy.

Mr Falcone made his billions betting against subprime mortgages; in 2007, his fund was up by around 115%. In 2010 he took control of LightSquared, a firm with big plans to build a wireless-broadband network. The Federal Communications Commission initially gave the go-ahead, only to change its mind in February after tests showed LightSquared's technology interfered with existing global-positioning satellites. With creditors pushing him to step aside, Mr Falcone put LightSquared into bankruptcy, hoping to buy a few months to come up with a new plan.

The future looks dark. Mr Falcone has ploughed around 2.9 billion dollar into LightSquared, and it now accounts for around 40% of his fund. At its peak in 2008 Harbinger Capital managed 26 billion dollar, but that figure has plunged to 3 billion dollar due to losses and investor withdrawals.

Getting cash out of the fund has not been easy. When investors pulled money after 2008, Mr Falcone first invoked “gating” clauses restricting redemptions and then agreed to pay them “in kind” with LightSquared shares as he sold other assets. In December he told them they could no longer withdraw anything.

That same month the Securities and Exchange Commission notified him that they may file civil charges against him. The SEC is examining whether he properly disclosed to investors that he took a 113m dollar loan in 2009 to pay his personal taxes (he has since paid this back), whether he engaged in market manipulation and an additional undisclosed matter. Mr Falcone denies wrongdoing and has not been charged.

Most agree he was reckless to plunge into such a long-term, illiquid investment. Mr Falcone has admitted his “asset-liability mismatch” and wants to raise more “permanent capital” instead. But who would write him a cheque? Critics predict LightSquared's bankruptcy will spell the end for Mr Falcone. Precedent would suggest otherwise. John Meriwether, the former boss of Long-Term Capital Management, is now running his third fund. Nicholas Maounis, once of Amaranth Advisors, another famous blow-up, now manages a 250m dollar fund. For a hard-nosed industry, the hedge-fund world is curiously forgiving.