BEVERLY HILLS, CA — A mainstream financial news website has stirred the murky waters surrounding porn hedge fund management company AdultVest Inc.’s rumored collapse.FINalternatives.com on Thursday published an article that quotes AdultVest founder Frances Koenig and two unnamed sources who claim to have privileged information. AdultVest manages the Priapus Investment Fund, which claims to place investors’ money behind adult entertainment.

An unidentified former employee and former investor tell a different story, according to FINalternatives: Koenig is looting the fund to pay for personal luxuries, and the hedge fund’s funds are dwindling, the sources claim.

The former employee told FINalternatives “there was no capital being generated” while he worked for AdultVest. “And it seemed like money was being spent for things that didn’t need to be bought, like cars, clothes and trips.”

According to the former investor, who claims to have gotten a court order giving him access to AdultVest’s financial records, “There is almost no money left in the fund. Koenig has an American Express black card through the company that he uses on partying, girls and high living. Most money is missing, and iPorn.com is not worth what he says it is.”

iPorn.com was one of AdultVest’s first purchases in the adult entertainment industry.

“Priapus’ only asset is iPorn.com, which cost about $250,000, yet $3 million is missing,” the former investor told FINalternatives.

The investor also alleged that another company under the AdultVest umbrella, AdultVest Events, never got off the ground because all of its funds were “stolen.”

Koenig refuted the claims, calling them “absolutely ridiculous” and “slanderous.”

“There’s one investor in our fund who has put himself in a tough financial position and he’s nervous about all of his investments, and not just this one,” Koenig told FINalternatives. “If it’s the guy I’m thinking of, he wanted to redeem capital from the fund, but the fund has deployed the money already.

“As far as where I spend my personal money, that’s completely separate from the fund,” he added. “I do use an AmEx black card to do purchases, but that is separate and apart from the fund. I take home a paycheck, and I can spend that paycheck however I want to spend it.”

Meanwhile, rumors continue to circulate online that AdultVest is in serious trouble. The company’s Beverly Hills offices are no more, according to some sources, employees have been laid off or taken severe pay cuts, and one of Priapus’ initially most-promising investments, strip club operator VCG Holdings Corp., showed a 60-percent loss last year.

“Everyone got paid their salaries, but I was trying to figure out how all of these salaries were being paid, and at one point I was told that it was being individually funded,” the former employee told FINalternatives. “It was a small office and there was a lot of talk and I just didn’t feel like I needed to be around that.

“In my opinion, this guy raised money to start a company, to live a lifestyle he wasn’t accustomed to,” he added.

In 2008, Institutional Investor magazine named Priapus “best fund launch of the year.” Partially, the honor was granted based on Koenig’s claim in an Atlantic Monthly article that the fund had gained 50 percent in value since its birth in 2007.

Koenig told FINalternatives he was misquoted in the Atlantic Monthly article.

“We have not reported a 50-percent gain to anyone, including our investors,” he said. “The fund had stopped taking capital at the $50,000-per-unit [price], and it raised the price to $75,000 per unit based on the fund’s progress and the investments that it had made. So we increased the per-unit buy-in price by 50 percent.”

The complete FINalternatives report is here: http://tinyurl.com/b9csrz.